Polish Housing Market Trends: Prices, Challenges, and Opportunities

The Current State of Poland's Housing Market

Poland's housing market has experienced significant changes in recent years, with prices reaching unprecedented levels. This trend has made home ownership increasingly challenging for many Poles, especially young adults and first-time buyers.

Rising Prices and Shrinking Space

In the second quarter of 2023, 700,000 PLN could buy a 65 square meter apartment in one of Poland's six largest cities (excluding Warsaw). Fast forward to the second quarter of 2024, and the same amount only purchases a 53.8 square meter apartment. This represents a loss of 11.2 square meters - essentially an entire room - in just one year.

The impact on potential homeowners has been substantial. An investor who delayed purchasing a 60 square meter apartment in a major Polish city for a year lost between 83,000 and 130,000 PLN due to price increases.

Historical Context

According to Eurostat data, the housing price index for the secondary market in Poland nearly doubled between 2010 and 2020. This rapid appreciation has outpaced wage growth, making homeownership increasingly unattainable for many Poles.

Future Projections and Market Dynamics

While some media outlets have reported potential price decreases, the reality may be more complex. Experts from PKO Bank have analyzed the market and predict that prices will continue to rise by approximately 2.5% until the second quarter of 2025, after which they may begin to decline slightly.

Factors Influencing Future Prices

Several factors will influence the housing market's trajectory:

1. Government Intervention: The absence of artificially subsidized loans or other external interventions could allow the market to stabilize naturally.

2. Interest Rates: A potential decrease in interest rates for standard mortgages could stimulate buyer demand. The Monetary Policy Council is expected to begin adjusting rates in mid-2025, though some economists predict changes as early as Q1 or Q2.

3. Economic Stability: Barring any major economic disruptions or geopolitical events, the market should trend towards stabilization.

The Opportunity in Home Construction

Given the current market conditions, building a house on one's own land has become an increasingly attractive option for many Poles.

Cost Comparison

According to the Extradom.pl report, the average cost per square meter for building a house on one's own land is approximately 5,500 PLN. In contrast, the cost per square meter for an apartment in a city can exceed 20,000 PLN. This significant price difference makes home construction a compelling alternative to purchasing apartments from developers.

Timing Considerations

The report suggests that now may be an ideal time to begin a home construction project. Several factors support this conclusion:

1. Future Regulations: Upcoming restrictions on heating homes with fossil fuels, as part of the EU's building directive, may increase construction costs in the future.

2. Land Prices: The cost of building plots is steadily increasing by 3-5% per quarter. At this rate, land prices may soon outpace apartment price growth.

3. Material Costs: Many construction materials are currently priced lower than during the pandemic peak. For example, steel prices have nearly halved compared to 2021, and lumber is about three times cheaper than its peak price.

Challenges in the Polish Housing Market

Despite the opportunities in home construction, the Polish housing market faces several challenges that affect both buyers and the industry as a whole.

Affordability Issues

Poland has one of the highest rates in Europe of young adults living with their parents. According to Eurostat data, Poles spend an average of 27 years living in their family home, compared to just 19 years in Norway or 21 years in Finland. This trend is largely driven by the difficulty in acquiring personal property.

In 2023, 52.9% of Poles aged 25-34 were living with their parents, according to the GUS report "Poland in the European Union 2024". This statistic places Poland among the worst in Europe for young adult independence.

High Mortgage Rates

Polish banks offer some of the highest mortgage interest rates in the European Union. Among countries closely associated with the EU, only Serbia and Turkey have more expensive home loans. This situation further complicates the path to homeownership for many Poles.

Government Support Programs

Many potential buyers are waiting for government support programs to make homeownership more accessible. Currently, the 0% credit program is stalled in parliament due to lack of agreement among coalition partners. Unofficially, work on a new project is underway in the housing department, but its implementation timeline remains uncertain.

The Case for Building a House

Given the challenges in the apartment market, building a house has become an increasingly attractive option for many Poles. The Extradom.pl report highlights several advantages to this approach:

Cost Efficiency

As mentioned earlier, the cost per square meter for building a house (approximately 5,500 PLN) is significantly lower than buying an apartment in a city (over 20,000 PLN per square meter). This price difference allows for much more space and often a better location.

Future-Proofing

Starting the construction process sooner rather than later may help avoid future restrictions and cost increases. The EU's building directive, which aims to make all new buildings emission-free by 2030 (and public buildings by 2028), could significantly increase construction costs in the coming years.

Land Investment

With building plot prices increasing steadily, investing in land now could prove beneficial in the long term. The limited availability of suitable land and potential changes to spatial planning regulations may further drive up land prices in the future.

Market Dynamics and Future Outlook

While there's much discussion about a potential housing bubble in Poland, experts suggest that a major crash is unlikely. Instead, we may see a correction or a slowdown in price growth.

Factors Supporting Continued Demand

1. Housing Stock Quality: Poland has approximately 4 million apartments in prefabricated buildings, housing about 12 million people. Many of these buildings are approaching or have exceeded their estimated lifespan, creating a need for newer, higher-quality housing.

2. Limited Modern Housing: Modern construction likely accounts for less than 25% of the entire housing market, indicating significant room for growth and replacement of older stock.

3. Wage-to-Price Ratio: Despite rapid price increases, the relationship between average wages and housing costs has remained relatively stable over the past 13 years. On average, one square meter of housing costs about 1.5 times the average monthly salary, a ratio that hasn't changed dramatically since 2010.

Global Comparisons

The UBS Global Real Estate Bubble Index 2024 indicates that Poland is not at risk of a housing bubble burst. In fact, Poland's property price growth is the second-highest globally, just behind Dubai. Cities like Miami, Tokyo, and Zurich are considered more at risk of a bubble.

Construction Costs and Labor

Poland still has relatively inexpensive construction services compared to Western countries. This factor, combined with the current low prices of many building materials, creates a window of opportunity for those considering building a home.

Conclusion and Recommendations

The Polish housing market is poised for dynamic changes in the coming years, influenced by a variety of external factors. While apartment prices may continue to rise, building a house remains a viable and potentially more cost-effective option for many Poles.

Key takeaways:

1. Timing is Crucial: The current market conditions, with lower material costs and before potential regulatory changes, may present an optimal time to start a home construction project.

2. Land Investment: Consider investing in building plots, as their value is likely to increase steadily.

3. Watch for Policy Changes: Keep an eye on potential government support programs, such as the 0% credit initiative, which could impact market dynamics.

4. Consider Long-term Value: While building a house may seem more complex than buying an apartment, it often offers better long-term value and customization options.

5. Stay Informed: The housing market is influenced by many factors, including geopolitical events, energy costs, and economic policies. Staying informed about these trends can help in making better housing decisions.

For those considering homeownership or investment in the Polish property market, now may be an opportune time to act. However, as with any significant financial decision, it's crucial to conduct thorough research and consider personal circumstances before making a commitment.

The full Extradom.pl report, available through the link in the video description, offers more detailed insights and projections for the Polish housing market. This resource can be invaluable for anyone looking to navigate the complexities of home buying or construction in Poland's dynamic real estate landscape.

Article created from: https://www.youtube.com/watch?v=xYoFD5NNqio