Covid-19 vs. 2008 housing crisis
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How does the stagnation caused by Covid-19 differ from the crisis of 2008? What was the impact on the housing market? In the opinion of developers, can the scenario from years ago be repeated? In which aspects? The survey is presented by the Dompress.pl real estate service.
Mirosław Kujawski, Member of the Management Board of Develia S.A.
The current market situation is difficult to compare to the crisis of 2008, which was caused by a typical speculative bubble. Additionally, the market looks quite different if we look at prices and purchasing power of customers, supply of flats or the range of available offer.
Taking into account current earnings and the creditworthiness of buyers, for the situation to be similar as regards the availability of flats, the prices of flats should be almost twice as high today. According to the National Bank of Poland’s calculations, Poles can now buy 0.82 sq.m of flats on average for their average earnings, while in 2007 it was only 0.48 sq.m.
At present, the residential offer is also the lowest in history and the sale rate is at a record low level, two quarters. In the nearest future, we can of course expect a drop in sales as well as the suspension of many new developments. The lack of a new offer will intensify the problems with obtaining building permits and necessary arrangements. In this respect, the first quarter of 2020 was very weak, and the second one will be even worse and no improvement should be expected in the following months.
Zbigniew Juroszek, President of Atal
The current situation is completely different from the crisis that occurred in 2008. At the moment, we see the coronavirus situation as a phenomenon that should not have a significant impact on the primary market in the long term. It is still too early to properly assess the situation and forecast the potential impact, both on primary market demand and housing prices. It is difficult to predict all possible effects and the time when the pandemic will affect the property market, which has so far been at a high stage of activity.
However, in terms of sales results, we saw a rebound in May and expect a return to sales levels similar to those recorded at the beginning of the year. Moreover, the situation on construction sites is stable. We are currently implementing and commencing investment projects in line with the previously adopted plan for this year. Therefore, there are no indications that we are dealing with a situation similar in effect to the crisis of 2008.
Janusz Miller, Sales and Marketing Director of Home Invest
The situation with COVID-19 and that of 2008 are similar in that their effects have affected the whole economy to some extent. As far as the current situation of the development industry is concerned, there is currently no indication that the 2008 scenario will be repeated. We are obviously observing a slowdown in the sale of apartments, but the situation is already starting to recover. Besides, all our investments are being implemented according to the schedule. We plan to start construction of further residential projects in Warsaw. We also do not expect significant price drops on the residential market. They are more likely to stabilize or even increase, assuming that the new supply on the market will be lower.
Małgorzata Ostrowska, Member of the Management Board and Director of Marketing and Sales Division at J.W. Construction Holding S.A.
The 2020 crisis, triggered by the COVID-19 pandemic, is nothing like the financial crisis of 2008-2009. Its consequences will also be different. That was a typical financial crisis, only slightly transferred to the real economy. No bakery, carpenter’s shop or restaurant went bankrupt. Unless they had previously purchased currency options and made bad assumptions about the direction of exchange rate changes. The banks and other financial institutions were in trouble. The crisis was therefore, in a way, over the heads of real consumers. To sum up, the crisis of 2008-2009 started “from above and went down”.
The 2020 crisis is a consequence of the lockdown, an administrative decision to freeze lives, including economic ones, by the governments of almost all countries in fear of the spread of coronavirus. This decision affected all entrepreneurs, primarily from the real economy and services, reducing the demand for their goods and services overnight. As a result of this decision, employers, manufacturers and employees were affected, who were largely deprived of the opportunity to work and earn money. Supply chains have been hijacked, extending the crisis to new areas of the economy and limiting supply. Demand disappeared, supply decreased – a simple recipe for the crisis.
It should also be noted that this crisis has fallen on us at a different time of building a society of prosperity. The resources of companies and people in Poland are incomparably higher compared to those we had to deal with 12 years ago.
Taking all this into account, it does not seem that the situation with a significant drop in the sale of flats, their production and a significant drop in prices could be repeated. Rather, we will have the phenomenon of an interval, a few months lost. This will certainly affect companies’ results, people’s income and the indicator of optimism, willingness to invest and consumption.
Monika Perekitko, Member of the Management Board of Matexi Poland
These are two completely different situations. First of all, the 2008 crisis had a bubble in its base, related to the real estate market in the USA. In Poland we also had to deal with a very fast, even jumping increase in apartment prices, which did not always correspond to their value. The market simply grew too fast.
At the moment we are at a completely different stage of market development, which in fact has been growing for a long time, but in a balanced, stable and responsive manner to the demand and economic development. The current crisis is of course a huge social and economic challenge, which will undoubtedly also affect the condition of the real estate market. However, I think it is one of the economic sectors that will suffer relatively less than other sectors. However, structural changes in the market should be taken into account, e.g. a gradual increase in the importance of the rental or long-term rental market. This does not change the fact that a modern apartment is still a scarce commodity and the market has very stable prospects for long-term development. I think that the current crisis will certainly significantly slow down the price increase. However, I don’t think we are facing any sudden changes.
Joanna Chojecka, Sales and Marketing Director at Robyg SA.
The current situation is completely different than in 2008. Both the demand and prices of apartments remain stable. We have actually recorded only a temporary shift in sales. The development industry, as confirmed by preliminary market research, is one of the sectors that is doing well in the current situation. Most companies have very quickly developed remote customer communication systems to keep their operations flowing and to continue sales. We assume that a possible temporary suspension of purchase decisions will not affect the general level of demand for apartments.
Zuzanna Należyta, Sales Director at Eco Classic
First of all, we have a different economic situation, a different cost of credit and a different relationship between wages and apartment prices. Assuming an average price of PLN 8,000 sq.m/month, 0.36 sq.m could be purchased in 2008 and 0.56 sq.m in 2019.
In the previous period investors were mainly foreign buyers for whom prices in Poland were low. They made block trades mostly in 10/90 or 20/80 systems, from which they started to withdraw avalanche. Suddenly, developers had as much as 80 – 90 per cent of their apartments back on sale, which they considered already sold.
We also currently do not have an artificial demand stimulator, which was frank loans, and such commitments were made by people who did not have the ability to borrow in zlotys. Purchases were often made for speculative purposes, which further stimulated price increases.
Nowadays, the industry has reacted much faster to the expected demand freeze and many companies have decided to suspend their investments. According to the Central Statistical Office (GUS), the construction of nearly 40% fewer apartments started in April this year than in April 2019. It certainly results also from the slowdown in the work of the offices.
Edyta Kołodziej, Sales and Marketing Director at Nickel Development
The previous crisis was related to the real estate industry and the present one is not, and therefore I think it will be different. We try not to repeat the scenario from the last financial crisis, because we have learnt from it. Much, however, depends on the effectiveness of the economic defrosting programme. We keep our fingers crossed for the decision-makers to make the right decisions to restore the pre-crisis situation as soon as possible.
Agata Zambrzycka, Sales and Marketing Director at Aria Development
Covid-19 will not cause such a crisis as in 2008. We observe that sales are slowly stabilizing and returning to pre-pandemic levels. There are also no sudden drops in prices on the market, although several large companies have offered larger promotions. In the third stage of the Natura Housing Estate, the last few flats were offered, whose prices were raised due to the great interest. In Osiedle Łomianki prices are maintained at a similar level as before the pandemic.
Ewa Skibińska, Marketing Manager of BY MADE Group
Although in recent months demand has been lower than before the epidemic, we are already seeing a recovery in the market. Following the unfreezing of the economy, customer interest is gradually increasing, although some investors are still holding back from making decisions. When analysing the effects of the epidemic, it must be borne in mind that in cities such as Wrocław, demand still exceeds supply. Construction works are being carried out without major disruptions, so we do not expect a repeat of 2008. We still have a large shortage of apartments in Poland. After the crisis of a dozen or so years ago, developers have become more cautious. They are more inclined towards a linear than a jumping supply growth.
Wrocław is a dynamic, developing city, its potential is growing. People want to live here, they come from other cities and still generate demand. Investments in great locations are very popular, which can be seen on the example of the Legnicka 60C building, located in the centre of Wrocław.
Sebastian Barandziak, CEO of Dekpol Developer
The current situation on the real estate market and in the economy as a whole is completely different from the crisis of 2008. At that time, everything was dictated by the collapse of the financial sector. It was only later that the crisis in other sectors of the economy was felt. The crisis of that time was caused by the excessive availability of mortgages, which caused the collapse of financial institutions. In addition, the value of bonds fell and the so-called price bubble burst. The current situation was not caused by problems of the financial sector, but by a pandemic. Before the pandemic, the situation in the development industry was excellent. The sales of apartments were high, which was confirmed by the growing wealth of Poles. Although this demand stopped for a while, it is now systematically reviving. Covid-19 did not influence consumers’ plans to buy apartments particularly strongly. Before the pandemic, about 53% of consumers declared that they wanted to buy a flat on the primary market, and now it is about 47%. However, the type of preferred properties is changing. The pandemic made houses, flats with gardens or large balconies or terraces more popular. I think that after a momentary slowdown we can count on a return to the normal situation on the real estate market. This is confirmed by the signals coming from Asia, which previously dealt with the pandemic.