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Insights

The housing sector at the crossroads

How are the pandemic, the war and inflation changing the residential market?

The number of new residential construction starts in August 2022 was down by 23% on the same time last year. Asking prices in the seven largest Polish cities have risen by 66% in the last five years, with the rental growth averaging 45%. Below are some other key findings of the report.

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The past two years have been marked by the pandemic, the war and the galloping inflation, which have significantly impacted the Polish economy, including the Polish housing market. The accompanying interest rate rises, very high prices of building materials and the pervasive uncertainty surrounding the future of the global economy are just some challenges faced by developers, constructors, investors and private buyers looking for accommodation. 

“Limited affordability to buy flats, coupled with the influx of Ukrainian refugees, has pushed rental remand across Poland to record levels. By no means, however, is this a result of only recent market changes and developments. Despite the robust development activity and boom in recent years, Poland continues to face a structural shortage of dwellings and it is feared that this deficit will be long-term and serious,”

- comments Katarzyna Lipka, Head of Research, Cushman & Wakefield

The new build market has come a to halt…

Both the high prices of building materials and tighter lending requirements have caused developers to suspend new projects. The number of new construction starts in August 2022 was down by 23% compared to 2021. Given the current situation in the new build market and the weaker demand from individual buyers, business diversification into build-to-sell (BTS) and build-to-rent (BTR) is likely to be an attractive option for many developers, helping them to get through the hard times.

New build asking prices in the seven largest Polish cities have increased by 66% in the last five years, posting a year-on-year gain of 15% last year alone. Of the biggest residential markets in Poland (Gdansk, Gdynia, Krakow, Łódź, Poznań, Warsaw and Wrocław), Poznań and Gdansk witnessed the sharpest rises of 21% and 20%, respectively, last year. Price growth is expected to cool in the coming quarters, with price adjustments on the cards.

…while rents have risen across Europe 

Rental rates have increased in 26 EU countries. The data for August 2022 and 2015 shows that only Greece has seen rents fall by 7%. Rental growth of over 40% was recorded in six surveyed countries, including Poland, where it hit 45%, with the EU average of 10%.

An analysis of nominal rents for flats in all the 27 EU capital cities has revealed that Warsaw comes sixteenth for rents, just behind Brussels and Prague.

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Łódź sees the sharpest rise in rents 

Rental rates continued to trend upwards across Poland between 2015 and 2020, with the fastest growth reported in Gdansk. Over the last five years, the highest percentage growth in average rents of 55% was seen in Łódź. PRS projects in the seven largest Polish markets, including the Katowice Conurbation, currently comprise more than 8,500 rental flats. In addition, there are 545 units in co-living projects, accounting for 0.057% of Poland’s housing stock.

Who rents homes in Poland?

Another survey of tenants’ preferences commissioned for the report has revealed that flats in Poland are rented primarily by young adults, with over half of respondents under 34 years old. As many as 10% of tenants have no written tenancy agreement in place and over half of respondents spend up to PLN 2,000 per month on renting a flat. 16% have failed to find a flat to rent due to strong demand on the housing market.

How does the PRS fit into all this?

“Adding rental flats to the housing stock by institutional investors is likely to be, in the long term, one of the solutions to the pressing problem of a shortage of dwellings. The Private Rented Sector (PRS) has been developing in Poland since 2014, with its growth gaining momentum in the last two or three years. Rental flats owned by specialized companies, however, continue to account for a small fraction of the entire housing stock in our country. Although this sector is facing many challenges, it has a huge potential which - in addition to supply factors - is also associated with a generational change and the evolution of preferences of buy-to-own vs. rent, and the rise of the sharing economy,”

- adds Katarzyna Lipka

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