Is it worth waiting for the fall in housing prices

In the second quarter of 2022, according to NBP data, new apartments were on average almost 18 percent. more expensive than last year. The dynamics of price growth is slowing down, but is it possible to count on price reductions in a situation when construction costs are soaring, housing is being built less and less, rental profitability is growing, and the purchasing power of money is rapidly declining? What do developers say about sales? Are they fighting for the client?

Tomasz Kaleta, director of the Sales Department at Develia S.A.
As the demand decreases, the supply in the market also decreases. Construction of apartments is a complicated, long-term process. When they sell worse, developers limit the implementation of new projects because they are not sure that they will find the right volume of buyers.
Therefore, apart from periodic promotions, it is difficult to expect that the flats will be cheaper. There are no ready-made premises on the market that could be discounted. They constitute only 4-7 percent on average. offers, while, for example, in 2014 their percentage was as high as 30 percent.
Additionally, the costs of general contracting, energy raw materials and building materials have increased recently. The prices of some products in 2021 alone increased by 30%, and due to the prolonged conflict beyond our eastern border, this trend is unlikely to reverse soon. In addition, there is also over 15 percent inflation. Therefore, I would not expect far-reaching price reductions in the near future.
Housing prices will grow steadily as they are correlated with the costs of general contracting and building materials. And these have recently become more expensive, so the costs of purchasing apartments in projects now launched for sale are also higher. It is possible that in the future the trend will reverse and as the costs of workmanship and materials decrease, there may also be price reductions. However, I would not expect this to happen in the near future, as the outlook for the inflation-struggling economy remains pessimistic and the conflict in Ukraine is still far from de-escalating.
No developer will sell flats below the cost of their production, but may suspend the implementation of new investments until more favorable market conditions return.
At the same time, interest on the part of cash buyers remains high. Currently, their share in our investments is 70-80%. This is a result mainly due to the outflow of credit customers. Due to negative real interest rates and a large increase in demand for rent, real estate remains a safe and attractive form of investment. It should be noted that this group does not only buy small premises for investment, but also large multi-room apartments for their own needs.

Angelika Kliś, member of the management board of Atal
Developers should increase housing prices due to the increase in manufacturing costs, including increases in the prices of materials, services and loans, but in the current state of the market, this is not the case. At the same time, cost factors mean that despite the reduced demand for flats, no significant price reductions are visible.

The lower scale of sales is primarily the result of difficulties in accessing loans. Therefore, a lot depends on the development of the situation in this area and the level of interest rates.

We do not plan price promotions or bonuses, but we meet the expectations of customers and they can take advantage of the Atal Holiday Program. Its advantage is primarily a guarantee of the price of an apartment and a flexible payment schedule, which gives more time to arrange financing. It is eagerly used by customers who do not want or can no longer withhold a decision to buy a flat, and at the same time are aware that the inflationary pressure will persist for some time. They also take into account that the developers' offer will shrink over time as fewer new investments enter the market. At the same time, the percentage of clients buying flats for investment purposes is increasing.

Prices will remain stable. We sell a lot of apartments at an early stage of investment. When implementing a given project, we must also take into account the possible increase in costs. It will certainly not be conducive to lowering home prices.

In the baseline scenario, we do not forecast a drop in prices at the moment. At least when it comes to the offer of leading companies such as Atal, whose pricing policy has a key influence on the trend across the industry. Perhaps smaller developers will decide on cuts.

Edyta Kołodziej, Nickel Development Sales and Marketing Director
Housing prices are a component of many factors. Rising interest rates, rising prices of building materials and problems with transport make a drop in house prices unlikely in the near future. However, promotions may appear on the market if the developer wants to sell the last flats from the investment or if he introduces a new one to the market.

After a temporary outflow of customers who would credit their purchases, we can observe the beginnings of stabilization in this area as well. Some banks have introduced loans with a fixed interest rate, which encourages buyers to buy apartments.

We have been observing an increase in the number of cash buyers for a long time. Today, we can estimate their share at around 80 percent. Investment clients have always been motivated to invest. In recent years, low interest rates have encouraged investors to invest surplus in real estate. Now such a reason is, among others the growing rental market, but also an escape from inflation.

Market analysts estimate that in the period until the first quarter of 2023, apartment prices will drop to a maximum of around 5%. At the same time, however, they indicate, with what we strongly agree, that the continued unpredictability of the environment may result in a different scenario and the upward trend in home prices will continue.

We already know that inflation will continue to rise, while construction costs related to the prices of building materials are slowly starting to stabilize. We are currently counting on investment demand, financed with cash. Customers now see an opportunity to invest in apartments for rent, due to the limited supply of the offer, rising rental prices and the increase in the value of real estate in the long term.

Marcin Michalec, CEO Okam
We do not anticipate a drop in apartment prices at the moment, as we have not noticed a decrease in the number of potential customers. We do not observe such a trend, neither directly in sales offices or in other sales channels - by e-mail and by phone. Clients still ask us questions and are still looking for premises.
The interest in buying real estate from the primary market has not changed, only the sale process itself is somewhat difficult due to the current situation on the credit market. Due to high interest rates on housing loans and more stringent criteria for determining creditworthiness, the demand for financing the purchase by the bank has significantly decreased and there is actually less credit customers.

On the other hand, we have cash clients who want to invest money for fear of losing its value. These buyers are determined to buy. There is no need to specifically encourage them. This is a large group of interested parties who research the market, observe its fluctuations and try to predict the situation in the future, which, however, is not easy at present.

Currently, there are more and more cash customers, everyone who has any resources to invest is getting activated. People who have cash want to invest it urgently for fear of the deteriorating economic situation, further increases in the inflation rate or general destabilization on the currency market. There is a clear desire among investors to escape inflation and to secure their situation for uncertain years. You can get a high rate of return from the lease, because rental rates have gone up. Immigrants from Ukraine also buy flats for cash.
It is difficult to forecast a drop in prices in the era of rampant inflation, which affects also developers, and not insignificantly. We are acutely aware of the increase in the prices of building materials and, above all, raw materials, which inevitably affects the higher costs of building new housing estates. Hence an easy conclusion that it must also be reflected in the prices of residential premises.

We function directly in relation to the General Contractors who impose certain costs of building the investment on us. It is difficult to argue with this, since objectively everything is getting more expensive and it also applies to building materials. We already have signals that material prices may fluctuate and it is no secret that it is about another increase. Every day we observe what is happening with the prices. Inflation is galloping and it is difficult to assume that this trend will stop.

Photo: MOJ URSUS Robyg
Source: dompress.pl