Growing demand for construction services, will the market be able to meet it? – The 6th Forum Construction in Poland 2022

Raport PMR

Ten post dostępny jest także w języku: polski

Despite the turmoil and recession in the economy, sales of developer housing units, especially in the second half of 2020, proved to be very good. The period of deceleration and market uncertainty lasted only about three months during the onslaught of the first wave of COVID-19, resulting 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.

Developers have been making efforts to ensure that there are no delays in ongoing investments. Seeing the continuing strong demand for flats, they unfroze investment projects already in the second half of 2020 and started new investments at a fast pace. There was no noticeable decline in newly started investment projects, which was noticeable in commercial construction. New housing construction commences remained at a very high level in 2020. The indicator of the number 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.

In 2020 as a whole, only less than 6% fewer housing construction commences were recorded (223,800) than in the recent record-breaking 2019. However, this was almost 2,000 more compared to the number of dwellings completed in 2020 (222,000).

The coming years will be a period of sustained high activity on the residential construction market. PMR forecasts in its report entitled “Construction Sector in Poland” that in the coming five years, the volume of newly-completed residential units will continue to remain above the threshold of 200,000 units per year. This level will be slightly broken only in 2026.

housing completed in Poland

A key factor, which definitely has a positive impact on the housing market, is the interest rate situation. In uncertain times, housing is seen as a refuge and safe haven in an environment of investment uncertainty. Customers are finalising their purchases, they see that waiting for a price reduction is pointless, as prices are not falling. The investment motive to buy is intensifying; on the other hand, the predicted low level of interest rates is supporting home buyers for their own housing needs.

The above phenomenon and the growing share of cash purchases of dwellings are clearly confirmed by NBP data on households’ funds held in the banking system. Since the outbreak of the COVID-19 pandemic in March 2020, Poles have withdrawn over PLN 115bn from bank deposits (deposits decreased between March 2020 and February 2021 by 40%). A significant portion of these funds goes to the housing market, which makes housing prices not fall but rise. As long as the 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.

Among the factors which positively influence the market outlook for residential construction, the following should also be mentioned:

  • A clear increase in interest in the Polish residential market by international investment funds investing in the PRS rental market. The huge potential of the Polish residential market attracts serious capital, and the rates of return achievable in the rental market are the most important reasons for the interest. In the past months we have witnessed several spectacular acquisitions, block purchases of units and announcements of investment plans.
  • The announcements of multi-functional developers regarding their plans to accelerate investments in the residential segment (Echo Investment, which took over Archicom’s shares, or Develia, which focuses on residential). It is clear that the leading developers will focus on residential, often at the expense of investments in the commercial part of the real estate market.
  • The changes outlined in the “Housing Package” provide a real opportunity to encourage local governments to increase the scale of housing investment. This will be a positive factor increasing the probability of realisation of a positive scenario for the housing construction market. According to the announcements of the Ministry of Development, Labour and Technology, in the next few years, under the Social Housing Initiatives, 18,000 flats may be built as part of cooperation between the National Property Stock and municipalities. This is a good prognosis for the SIM idea, and if only the mechanism is efficient, the results of the new programme will certainly be more favourable compared to the failure of the current Mieszkanie+ programme.

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