The downward correction in housing prices that began in the second half of 2022 will continue for the time being, but not beyond next year, analysts at PKO Bank Polski estimate in their “Housing Price Monitor.” The report also shows that the minimum for housing sales in the current cycle was in Q3 2022.
“The recovery of demand does not necessarily mean an immediate return of prices to an upward trend. We believe that in 2023, in a disinflationary macroeconomic environment, the gentle correction of housing prices that began in the second half of 2022 will continue. This has to do with the strong increase in the market’s offerings relative to current sales opportunities. The freezing of new housing projects, together with the expected recovery in demand, will limit the scale of price declines to 5-10% y/y,” according to the analysts.
“A scenario in which the market’s downturn will not be long-lasting and the next year will bring a return to an upward price trend seems increasingly likely,” it was added.
According to preliminary estimates based on PKO BP data, the average transaction price per square meter of an apartment on the primary market in the 6 largest cities in Q4 2022 fell by 1% q/q and rose by 4.7% y/y, compared to a 10% y/y increase in Q3 2022. In the remaining 10 provincial cities, the price rose 7.7% q/q and 8.5% y/y vs. a 2.8% y/y increase in Q3 2022. The surprisingly strong price growth for smaller cities may be due to poor data quality due to the low transactional volume of these markets.
The average total amount of transactions in the primary market in Q4 2022 increased by 2.7% q/q and 9.7% y/y, compared to an increase of 11.3% y/y in Q3 2022, it was also reported.
Characteristic of Q4 2022 is a noticeable increase in the number of transactions in the housing market, as well as an increase in the average square footage of apartments purchased. This reinforces our belief that the minimum sales in the current cycle occurred in Q3 2022, according to the report.
We reiterate our opinion that purchasing power in the housing market will gradually recover in the coming quarters. This recovery will be the result of a decline in interest rates and an improvement in the ratio of income to housing prices. In addition, we are currently seeing strong growth in bank time deposits, especially among wealthier households. These savings, when the housing market improves, could partially fuel the market. The government’s 2% Safe Credit program, which supports first-time home buyers, has been announced for the second half of the year and will also support the demand side. It is worth mentioning, however, that the program’s announcement will probably hold back purchase decisions of those planning to buy their first apartment in the first half of 2023, the report concluded.
Source: PKO BP and ISBnews
