Construction and assembly production in the housing segment will increase by 1% this year
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The value of construction output in the housing segment will increase by 1% in 2021, following a 4% growth in 2020, PMR’s chief construction market analyst Szymon Jungiewicz said in an interview for ISBnews. He added that in the following years the market would witness high activity.
PMR’s expert estimated that in 2020, construction output in the residential segment would increase by 4% y/y to PLN 80.6bn.
“Residential construction, despite numerous risks and uncertainty factors, has shown very high resilience to the negative effects related to the COVID-19 outbreak. Despite the turmoil and recession in the economy, sales of developer housing, especially in the second half of 2020, proved to be very good,” Jungiewicz told ISBnews.
“The period of deceleration and market uncertainty lasted only about three months during the onslaught of the first wave of COVID-19, which resulted in a 4% increase in the value of the residential construction market segment in 2020. PMR estimates that residential construction reached PLN 80.6bn in 2020,” – He added.
He pointed out that developers made efforts to ensure that there were no delays in the ongoing investments – seeing the continued strong demand for flats already in H2 2020. They “unfroze” investment projects and started new investments at a fast pace.
Jungiewicz also added that there was no decline in newly started investment projects in the residential segment, which was the case in commercial construction.
“In 2020, new housing starts remained at a very high level, and the rate of construction starts best reflects investor sentiment. Decisions to start investments reflect their assessment of the market situation, hence the strong translation of this data into the expected economic situation in the coming quarters,” – he explained.
Asked about the forecasts for the whole housing construction segment in 2021, the PMR expert estimated that construction and assembly production would grow by 1% y/y in the current year.
He noted that the entire year 2020 recorded “only” 6% fewer housing starts – 223.8 thousand – than in the recent record-breaking 2019. This was almost 2 thousand more compared to the number of flats completed in 2020, when the result was 222 thousand.
According to Jungiewicz, the coming years will be a period of sustained high activity in the residential construction market in Poland.
“We forecast that in the coming five years the volume of newly completed housing units will all the time remain well above the threshold of 200,000 units per year. Only in 2026 will this level be slightly broken,” – he said.
He added that a factor that has a decisive influence on the positive outlook for the residential construction market is the situation on the money market related to the low level of interest rates.
“In an environment of investment uncertainty, housing is seen as a refuge and a safe haven. Customers are finalising purchases as they see that waiting for a price reduction is pointless as prices are not falling. Investment-motivated purchases are intensifying and, on the other hand, the forecast continuation of low interest rates is supporting home buyers for their own housing needs,” – he explained.
“The above phenomenon and the growing share of cash purchases of flats are clearly confirmed by the NBP’s data on household funds placed in the banking system. Since the outbreak of the COVID-19 pandemic in March 2020. Poles have withdrawn over PLN 115 billion from bank deposits and the value of deposits between March 2020 and February 2021 decreased by 40%,” – Jungiewicz pointed out.
In his opinion, a significant portion of these funds goes to the housing market, which makes housing prices not fall, but rise.
“As long as the current interest rate policy is maintained with high uncertainty in the investment market, the housing market and housing purchases will be the beneficiaries of the observed situation,” – he added.
He also pointed out that the single-family segment of the housing market is still very stable.
“Individual investors have practically not reacted to the pandemic situation. What’s more, the restrictions have resulted in an increase in the popularity of single-family houses” – he said.
“In an era of widespread austerity and uncertainty and remote working, having larger square footage and backyard green space and the issue of isolation from society has increased the popularity of single-family construction,” – he added.
According to data from the General Office of Construction Supervision (GUSB), some 97.7 thousand single-family homes will be completed in 2020, an increase of 6.6% y/y. PMR estimates that more than 123,000 single-family homes will be completed and construction reports filed in 2020, representing an increase of 6.5% y/y.
Among the factors positively influencing the outlook for the residential construction sector, Jungiewicz enumerated, among others, a clear increase in interest in the Polish residential market among international investment funds operating in the PRS – private rented sector.
“The huge potential of the Polish residential market attracts serious capital, and the yields achievable on the rental market are the main reason for the growing interest from funds. In the past months, we have witnessed over a dozen spectacular acquisitions, block purchases of units and announcements of investment plans,” – he pointed out.
“A group of new investors appeared on the market, such as: Zeitgeist Asset Management, Catella Polska, Atrium Real Estate, Van der Vorm Vastgoed, Aurec Capital Poland, Heimstaden Bostad, LRC Group or Youniq chain. Investments are not slowed down by Resi4Rent, Vantage Development, so one can conclude that the PRS segment is becoming a larger and larger market segment, which significantly influences the situation in residential construction in Poland”. – he added.
According to PMR’s expert, in the near future, the situation in the residential construction sector will also be significantly influenced by the actions of multi-sector developers who have announced the acceleration of investments in the residential construction segment.
“It is clearly visible that the leading developers will bet on housing, often at the expense of investments in the commercial part of the real estate market. I am thinking here, for example, of Echo Investment, which has taken over a stake in Archicom, or the Develia company, which is betting on housing,” – he said.
A positive impulse for the housing market may also be given by local governments, and the changes presented in the “Housing Package” give – in Jungiewicz’s opinion – a real chance to encourage local governments to increase the scale of housing investments.
“This will be a factor increasing the probability of realization of a positive scenario for the housing construction market,” he added. – he pointed out.
According to the Ministry of Development, Labour and Technology’s announcement, 18,000 flats could be built from the Social Housing Initiatives programme in the coming years, as a result of cooperation between the National Property Stock and municipalities.
“This is a good sign for the idea of Social Housing Initiatives and if the mechanism is efficient, the results of the new programme will certainly be more beneficial compared to the failure of the existing Mieszkanie+ programme,” the PMR expert assessed.