• Anna Koval

The outlook for Poland's residential market



Poland's residential property market has a different structure than those in Western Europe.

In Poland, supply is mostly created by developers that build properties for sale, active mainly within the multifamily housing sector. Demand is typically generated by private individuals, who purchase a property to live in or rent out.


Today, Polish residential developers are in good shape. Since 2014, residential developers have been setting new sales volume records, with only a moderate increase in prices, which are still far from the heights they reached during the housing bubble of 2006-2007.


According to Poland's statistics office, in 2017 alone, residential developers delivered nearly

90,000 units, some 13,5 percent more than in 2016. Optimism is still there - in 2017, residential developers started construction on more than 105,000 apartments, 23,3 percent more than in 2016.


The current boom in the market is mostly driven by low interest rates, which on one hand significantly decrease the cost of mortgage loans, and on the other discourage private individuals from keeping their savings in the bank: up to 50 percent of new apartments are acquired only from savings - without mortgage loans.


Low interest rates incentivize private individuals to seek higher returns from other investments, one of which could be a rented-out apartment. The rental market is still strong in Poland's largest cities, due to a constant shortage of affordable housing and an influx of immigrants from Ukraine. Additionally, Poland's consistent economic growth, along with general price stability, has increased Poles' disposable incomes, which in turn has improved

their creditworthiness. This allows them to purchase apartments for their own residential needs or for investment purposes.


Market experts do not expect any significant downturn in 2018, but residential developers in Poland will face a few challenges.


First, high demand has significantly increased the pace new apartment sales, and some developers struggled to maintain or expand their sales offer.


Land is getting more and more expensive, with prices rising by as much as 40-50 percent in the largest cities just over the past year. A shortage of both skilled and unskilled labor has significantly increased the cost of new investments: some companies' construction costs rose by as much as 10 percent in the second half of 2017 alone. Rising costs may push new apartment prices higher, which may hamper sales growth.


Also, low interest rates cannot last forever. The first rate increase is expected in 2019 and market analysts predict that it could slow the growth of Poland's real estate market.


Finally, the fast-growing rental market in Poland's largest cities may change significantly in the near future, as the government is working on the "Mieszkanie+" ("Apartment+") housing program.


The goal of the initiative is to deliver more than 10,000 affordable apartments for rent over the next two years. Moreover, institutional investors may become much more important, due to changes in the law allowing creation of real estate investment trusts (REITs).


Despite the risks mentioned above, the prospects for Polish residential developers are still very good. Residential developers in Poland do most of their business in the few largest cities and if the demographic and migration predictions are correct, those markets should

see strong demand for new apartments.


Moderate price growth shows that the market is balanced. On the other hand, growing competition, as well as political and regulatory risks (Mieszkaniet, REITs) and rising interest rates may alter the price levels and attractiveness of investing in an apartment to rent out.

Considering these factors, individuals could make a higher return by purchasing investment funds, or top residential developers corporate bonds (or in the future, the newly created RETs), rather than taking the risk of a single-asset rental.


Land is getting more and more expensive, with prices rising by as much as 40-50 percent in the largest cities just over the past year.