Housing market analysts say the recent interest rate hike is not a huge revolution for buyers. However, as they emphasize, further increases – if introduced – may “cool down” the housing market, stop demand and increase prices.
As Marcin Jańczuk from Metrohouse said, the recent increase in interest rates means an increase in the installment – in the case of an average loan – by several dozen zlotys, so for the time being it has not been influenced by decisions to buy a flat. He noted that the psychological factor is more important than the scale of possible further rate hikes. – Each subsequent increase may weaken the demand and the willingness to invest in the real estate market, and also make it difficult for many people who are interested in buying a flat to access real estate, the analyst assessed.
Housing prices. Expert: Higher interest rates will have a cooling effect on the market
He added that the real estate market is related: the increase in the prices of labor, building plots and construction materials in the primary market carries the risk of further price increases in the secondary market, while prices in the secondary market strongly affect what is happening in the primary market.
– In addition, we have a combination of various popandemic elements, such as the lack of subcontractors, construction teams. Related to this is the need to pay higher rates to teams that already deal with the implementation of individual investments. The pandemic also showed that Poles are willing to invest in the real estate market. The supply generated by developers in the largest cities has not been able to meet the demand for flats in recent quarters, mainly in this popular segment, i.e. from thirty to fifty square meters. – said Janczuk.
Obido.pl housing market expert Marcin Krasoń also agrees that the decision of the Monetary Policy Council is not a great revolution, because the loan installment has increased by an average of 5-6 percent. – Creditworthiness also fell a bit, but it is also not a significant decrease. However, the recent interest rate hike may be a signal that more may be expected, although the MPC’s actions are unpredictable – emphasized the analyst.
In his opinion, if there are further increases, it will be 100 percent. will have a cooling effect on the residential market. – The installment increase will then be more severe, as will the decrease in creditworthiness. People who buy on credit will be more careful about it. On the other hand, an increase in interest rates also means an increase in interest rates on bonds and deposits. So the possibility of a more attractive allocation of funds will return, because today the interest rate is 0.5 percent. at almost 6 percent. inflation seems like a joke. So I think that some of the money will flow out of the housing market and will reduce demand – said Krasoń.
He added that currently we are dealing not only with high demand, but also a small supply of flats. – Plots are missing, formalities are lengthening. We have an unhealthy situation that the prices per sq m. are growing rapidly, flats are selling out like hot cakes and before the developer starts selling for good, he already has half or two-thirds of flats sold. As interest rates reach the level of 2-3 percent. and inflation growth will be halted, the housing market will slow down a bit. It will be beneficial for all market participants, also for developers who prefer the market to be calmer, more predictable – said the expert.
Real estate prices. Three groups of buyers
There are currently three groups of buyers, he noted. The first are buyers for their own needs, the second – professional investors who have a lot of money and a lot of apartments bought for investment purposes. – They have a lot of experience, they scrap their investments and are already cautious; they see that apartment prices are rising much faster than rental rates, which makes the investment less and less profitable – he noted.
As he said, the third group of buyers are people who have no experience in the market, but have accumulated some savings and have nothing to do with them. – This is a high-risk group that cannot estimate the profitability of an investment. Because it’s not that if we buy a flat for rent, we will always rent it, always at an average rate and it will not generate additional costs. As interest rates rise and there are alternatives to investing money, this group of buyers will decrease, the demand will calm down and perhaps some equilibrium on the market will return – assessed Krasoń.
At the beginning of October, the Monetary Policy Council raised the reference NBP interest rate from 0.10%. up to 0.50 percent on an annual basis. According to economists, this is the beginning of the monetary policy tightening cycle, and, according to some analysts, the Council may decide on the next rate hike already at the November meeting.
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