Rodzinne Inwestycje: Price of land offered increased by 9% y/y in 2023
The average price of land offered by the company Rodzinne Inwestycje was higher by approximately 9% y/y in 2023. At the same time, the average value of transactions carried out by the company's clients increased by approximately 23%, the director of the Investment and Development Department, Dariusz Seges announced. The company expects a good land boom already in the first quarter of this year.
"The amount of our turnover last year was slightly lower. This was caused by unfavourable market factors such as high inflation and an atmosphere of military crisis and political change in the country. On the other hand, however, the security provided by investing in land drove investors to the course - investment land. They invested on average 1/5 more in projects in our country than before, choosing land from higher price levels," said Seges.
"However, there has not been the outflow of investors expected by many. Our clients are operating on a long-term model of 3-4 years. There have been investors looking for land for quick development, wanting to build leisure or rental properties. However, this is a result of the increase in property prices caused by the 2% loans, not the programme itself. Nor is this a significant increase. Much more strongly the proportion of our investors buying for investment or rapid construction changed after the coronavirus pandemic. Before its outbreak, the ratio was 97% of investors interested in the long term to 3% wanting to build quickly on purchased land. After the pandemic, the relationship changed significantly. The percentage of longterm investors dropped to 85%," he added.
The first figures from Family Investments for last year show that December enjoyed increased investor interest. As the company's representative points out, this is due, among other things, to transactions related to tax optimisation. For this reason, he also anticipates a slowdown in the first months of this year. However, he believes that 2024 will be a period of noticeable growth for the company.
"We expect a good upturn in the land property business as early as the first quarter of this year. This is indicated by the noticeably better investment sentiment, which is positively influenced by the stabilising situation on the inflation field or the political situation in Poland, with the prospect of raising funds from the NIP," Seges predicts.
According to the company's representative, inflation, apart from a temporary slowdown in the real estate market, especially in the construction sector, has not caused a significant price correction - even despite the reductions in the prices of construction materials recorded in the autumn of last year. Analysing the company's portfolio, the expert points out that it has not caused land price reductions in the market either, with occasional promotions occurring in exceptional situations where there was a need for quick cashing in. According to the company, the average price of Family Investments' investment land sold last year increased by around 23%.
"Only a few months ago, many investors expected a clear correction on property prices. However, it must be remembered that with high inflation, real estate does not get cheaper. Instead, the purchasing power of our money falls. Paradoxically, this may even stimulate demand. This is because it is associated with a depreciation of the amount of credit used to finance this type of investment. Inflation should even encourage people to invest in credit for the purchase of real estate, even if credit instalments are temporarily higher at present," Seges pointed out.
Experts cooperating with the company point out that despite optimistic announcements from representatives of the National Bank of Poland, Poland is still under the strong influence of inflation. At the same time, they suggest that expectations of deflation may be decidedly premature.
Professor Witold Orłowski points out that at present, prices of energy raw materials and foodstuffs are already significantly lower worldwide than they were a year ago. Theoretically, therefore, deflation should occur in our country. Yet, prices continue to rise at a rate of several percent per year. Economists describe this as turning on the effects of the so-called "second round". This is when inflationary expectations rise permanently: people expect wage increases, and these are passed on to increases in production costs.
Rodzinne Inwestycje experts point to the war in Ukraine and Israel as an element indirectly shaping investor sentiment in the property market last year. In their view, the greatest impact on investment decisions was during the first phase of the conflicts, creating high uncertainty resulting in the holding back of less liquid investments.
"The hostilities in Ukraine have been going on for a long time. Our society has, in a way, already become accustomed to the situation. Therefore, after the temporary boom in property purchases in Spain recorded during the first period of the armed conflict across our eastern border, today the situation has managed to stabilise in the domestic market. The war in the Middle East, on the other hand, is clearly having a major impact on global fuel markets and may stimulate our inflation in the long term. However, it seems to have little impact on the Polish property market," Seges assessed.
On the other hand, the government's 2% safe loan project had only an indirect impact on the investment land market. It caused a large increase in demand on the housing market, ultimately leading to a decrease in the supply of flats and, consequently, an increase in their prices. As a result, on the basis of expected less attractive housing yields, investment land prices increased.
Source: Rodzinne Inwestycje and ISBnews
