Increased income, cheaper loans and high demand. Real estate prices will continue to rise

Luc Williams

The published report “Real estate market in Poland 2024” by Bank Pekao shows that real estate prices in Poland have not yet reached the maximum level. This is due to the increase in the real income of Poles, significant potential for improving lending and high structural market needs. In the short term, price increases could slow down due to rising credit prices, but in the long term, only demographics may contribute to price declines, it was pointed out.

Ban noted that the increase in real estate prices in Poland was among the fastest in the entire EU, reaching 59 percent in 2018-2023. This places us among countries such as the Czech Republic (63%), Estonia (69%), Lithuania (74%) and Hungary (85%). However, it was noted that high price increases on the real estate market were associated with increased CPI inflation (the index after adjustment for inflation in the prices of consumer goods and services). In relation to the so-called consumption basket, apartment prices in Poland increased by 20% in the same period. – given.

As added, wages in Poland are growing at a pace similar to real estate prices. This translates into the stability of housing availability, both in terms of wages (how many square meters can be bought for an average salary), cash (how many square meters can be bought for an average household's bank deposit) and in terms of consumption (how many square meters can be bought for the equivalent of the Central Statistical Office's consumption basket).

“At the same time, 2022-2023 brought a clear decline in the availability of credit for apartments due to increases in interest rates – but this mainly applies to buyers who do not use mortgages subsidized by the government,” the report emphasizes.

As Bank Pekao analysts pointed out, high mortgage loan costs related to increased NBP interest rates are, in the short term, the only factor that could hypothetically reduce the demand for apartments and, as a consequence, lead to a market depreciation. It was emphasized, however, that currently in Poland only three out of ten apartments are purchased on credit, and the rest are concluded in cash transactions, which limits the role of credit costs in shaping the market.

Mortgage interest rates

The report noted that additional support programs (Safe Credit 2%) significantly reduced the effective interest rate for borrowers. It was added that in the coming months and years, the most vulnerable consumers will likely receive targeted assistance from the #NaStart program. Additionally, demand may be stimulated by former Swiss franc borrowers who, thanks to court victories, gain the opportunity to return to the market with the recovered capital in order to meet the postponed demand, the report said.

“The cooling effect of high interest rates is visible with a noticeable delay – we expect that a temporary drop in prices will begin in the second quarter of 2025. However, a barrier to stronger declines will be the persistent, strong demand,” Bank Pekao analysts said.

The analysis noted that the housing needs of Poles are large and unmet – there are too few premises in Poland and they are overcrowded. Developers seem to notice the high demand and are increasing the offer. There were almost twice as many construction starts in February 2024 as in the previous year, despite the difficulties in acquiring new land expressed by developers – according to the data presented in the report.

In the opinion of the authors of the report, in the long term, demography will be a factor stabilizing the market, as Poland is becoming depopulated. However, it was noted that this effect would bypass agglomerations. According to data from the Central Statistical Office, by 2040 all the largest cities in Poland will record an increase in the number of inhabitants, the authors pointed out.

“We believe that structurally, the Polish real estate market is at a point where increasing demand is still driving price increases (the Czech Republic and Spain occupy a similar position in the cycle). The moment when rising prices will stifle demand (as currently, e.g. in Portugal) is still ahead of us, and we will have to wait even longer for price drops related to weaker demand,” concluded Pekao specialists. (PAP)


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