There is no doubt that there is a decrease in demand for flats. Due to the greater risk of a serious crisis in the economy, some people refrain from buying real estate, this is quite a normal phenomenon. Both investors and buyers do it for their own needs. The theory says that when demand falls, they should fall and prices. This is a good time to look at developers’ price lists.
Demand largely depends on the attitude of the banks. If these firmly screw the tap with loans, many people will be cut off from financing, deprived of the opportunity to buy an apartment. But they will have to live somewhere, so they will go to the rental market. So it may be that the fall in demand “for own needs” will be reflected to a certain extent in the increase in investment demand.
The thing is, we have to add a drop in supply to the fall in demand this year. According to the data of the Central Statistical Office, in May and April developers started construction of 12.4 thous. apartments. In the same period a year earlier it was 22.7 thousand. premises, i.e. by 80% more. On the one hand, there are external obstacles (offices still operate to a limited extent, which translates into the speed of completing formalities), but there is also a second reason for the decrease in supply.
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Developers are aware of reduced demand, so they are not in a hurry to start new construction. There are allegations that this is deliberate play so that prices do not fall. It sounds more credible, however, that nobody wants to stay with unsold apartments, and at the moment most companies still have something to sell. So many developers prefer to calmly observe the situation and react on a regular basis.
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Obido developers’ price lists on an ongoing basis are able to immediately spot their changes. In January and February, average prices on all markets studied (Krakow, Tri-City, Warsaw and Wroclaw) increased. The pandemic immediately stopped this trend and since then we have been observing slight fluctuations in one direction or the other. When we look at prices from a broader perspective, at the beginning of June they were slightly above the level from the beginning of January. For example, in the Tri-City it was 5.1 percent more, and in Wrocław by 2.4 percent
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According to developers, there is not much room for price drops today. Margins are small, and the prices of plots, labor or building materials have not dropped at all. The drop in prices associated with the reduction of costs would really be beneficial for everyone, because buyers could buy cheaper apartments and the market would move, and developers would not have to lower their margins, for which they do not have space at all.
National quarantine and the rapid increase in time spent by Poles at home meant that people began to attach more importance to where and how they live. A spacious apartment with a balcony, loggia, garden or terrace is an incomparably better place to spend time than a place without these attributes. Space is needed not only for rest, but also work, because the era of home office started in March is still ongoing.
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In the following quarters, demand should be expected to increase not only for comfortable apartments, but also for real estate with real estate infrastructure. A decent playground or green area will become an important factor in choosing a given property. And if they are willing, the prices of such properties may increase. The same as ready-made flats, because there are fewer and fewer on offer each year. JLL data shows that in the largest markets the percentage of ready apartments in the developers’ offer is 8 percent. Companies with them on offer will be able to afford rate increases.
On the other hand, unattractive flats will be even less attractive in the eyes of customers, which will lower their prices and as a result there will be greater stratification of rates. Good apartments will become more expensive, and less attractive ones will be built.
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But price drops will not happen overnight. Developers have other tools to fight for the client on hand than reducing prices in the price lists. There are various promotions in the form of temporary discounts on selected apartments or freebies. Before the company lowers prices, it will first give a parking space in the price of the apartment or set a temporary promotion for the least susceptible premises.
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It should be emphasized that there were always promotions and freebies, currently there are a little more. Their presence dictates the different sales strategies of individual developers. Some start selling investments by promoting less attractive flats, while others leave them at the end and only then, looking at the current situation, decide what to propose to customers.
It is worth taking a look at the currently prepared promotions. Because it looks like the developers are confident and don’t expect price drops. For example, Develia guarantees in the 3×0 promotion that after signing the reservation contract you can withdraw from it without any payment. PCG does the same if the customer receives a negative credit decision. The Archicom Protective Shield prepared for investors is, in turn, a tenant guaranteed for two years or covering the cost of a two-year rental. If developers were expecting price reductions, they would not offer such guarantees. And from the very interception of reality by Internet users, prices will not fall.
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The decrease in construction costs or simplification of formal procedures would help the most. So it seems that the likely scenario now is relative price stability with fluctuations back and forth. The time of dynamic increases has definitely ended, but there is also nothing to count on spectacular declines.
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As a curiosity, it is worth adding that in a situation of dynamic price increases, the best flats often fall prey to people who buy them for investment – just to sell them at a profit after a few months or a year (before construction is even finished) ). During the period of price stabilization, such an idea has no right to exist, which means that buyers for their own needs will have more choice.
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