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Housing prices in Poland in the second quarter of 2022 – primary market

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In the second half of 2022, housing prices will begin to decline, PKO BP analysts believe. In their opinion, this trend may last 1.5-2 years. They add that the strong increase in construction costs, with the inability to transfer this increase to housing prices, causes a decline in the profitability of new projects.

According to PKO BP data, the average transaction price in Q2 2022 was primary market in the 6 largest cities, it increased by 0.3 percent. Kdk and 13.7 percent. y / y compared to an increase of 17.7 percent. yoy in Q1. A drop in the average price compared to Q1 was recorded in Kraków, Łódź, Poznań and Wrocław. The prices of flats in the primary market in Warsaw increased by 1.7%. kdk.

Housing prices – the latest forecasts

“We estimate that in the second half of the year, transaction prices of flats will start to decline gradually. The forecasted decline in prices results mainly from a significantly reduced demand due to an increase in interest rates and a tightening of lending policy as a result of the KNF’s recommendation for banks” – analysts assessed in the report.

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“At the same time, the housing boom in recent years has launched many new investment projects and strengthened the weakened supply side of the market, especially outside the largest cities, which in the current phase of the business cycle is not conducive to maintaining price increases,” they added.

As they indicated, the peak of apartment sales fell in the second quarter of 2021 and a gradual decline in transaction volumes has been observed for a year, with a very strong decline in May and June this year.

“A strong increase in the cost of construction of apartments, with the impossibility of transferring this increase to housing prices in the conditions of weakening demand, causes the profitability of new projects to decline, and developers decide to suspend new investments. This will result in a reduction in new supply in the next 2-3 years.” – wrote in the report.

“From the point of view of housing construction activity, the current signs of declines in prices of building materials are important. We believe that with high inventories in companies, the downward trend may continue. In such a scenario, it will be likely that projects will be launched with lower asking prices,” he added.

Interest rates

In the opinion of PKO BP, the current cycle of monetary policy tightening is coming to an end.

“In view of the forecasts of a marked decline in GDP growth in the coming quarters and a decline inflation to the target in 2024, the central bank may react before the end of 2023 interest rate cutsstrengthening the demand side of the housing market and causing it to revive in 2024 “- analysts assessed.

NBP reference ratePAP / Maciej Zieliński

We expect the decline in home prices to continue for around one and a half to two years. As a result, prices will return to the levels from the first half of 2021, and thus the dynamic increase in prices from Q3’21 – Q1’22, recorded in the conditions of falling sales, will be corrected. In our opinion, the market will return to dynamic price increases in 2025 “- they added.

Main photo source: Shutterstock

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