Increase in demand for housing in an environment of low interest rates, regulatory changes and rising costs in construction may translate into an increase in housing prices by 8-10% y / y in the perspective of one year, analysts assume in the baseline scenario PKO Bank Polski.
“After a mild y / y slowdown in home prices in the second half of 2020 (with local q / q declines after the outbreak of the pandemic), the situation in the housing market signals a renewed acceleration in price growth in the coming quarters. In the baseline scenario, we assume a gradual strengthening of the upward trend in home prices in the following quarters of 2021. In the perspective of one year, prices may increase by 8-10% y / y,” according to the report “Housing market 2q21: The price increase accelerates after the pandemic slowdown.”
The reasons for the increase in apartment prices are:
(1) high demand for flats, strongly supported by record low interest rates – PKO BP expects that they will remain unchanged at least until mid-2022;
(2) significant stimulation of the purchase of flats with the intention of saving savings in the conditions of the expected longer period of increased inflation;
(3) fundamental factors in increasing construction costs – high plot prices, rising material costs, cost pressure with competition for workers and equipment rental with other segments of the construction industry;
(4) regulatory factors – stricter standards for energy efficiency of buildings from 2021 and the Development Guarantee Fund, the costs of which will be included in housing prices by developers (the act signed by the president on June 8, 2021, the provisions on the establishment of the DFG enter into force 30 days from the announcement of the act).
“A factor that may, to some extent, stabilize the upward trend in home prices is the large portfolio of flats with the completion date in this and next year. The uncertain situation on the flat rental market is still hampering. Although the decline in rental rates has slowed down in most large cities, short-term rental for tourism purposes will recover slowly (with a gradual easing of restrictions), and the dissemination (after the pandemic) of a hybrid model of work and study reduces the demand for long-term rental housing,” according to the report.
In the optimistic scenario, low interest rates are kept for a long period, the epidemic is brought under control (supported by the vaccination of the majority of the population) and economic normality returns. In these conditions, the rental market is quickly rebuilding – short-term rental for tourists returns, students start studying in the autumn stationary, and foreigners work in Polish companies to a greater extent, which strengthens the prospects of long-term rental. In the perspective of the year, it is possible that housing prices will increase by 15% y / y, the report also announced.
“The pessimistic scenario is connected with the necessity of earlier interest rate increases – already in 2h21 – due to the inflation increase greater than currently forecasted. A slowdown in demand in the conditions of growing (now starting) supply would result in a downward trend in housing prices. The premises of the pessimistic scenario are also (1) another wave of an epidemic with a modified virus (at the same time a limited degree of vaccination of the population) and (2) unfavorable external environment (disruptions in the mobilization of funds from the reconstruction fund), which by worsening consumer moods weaken the demand for housing and may cause downward trends in housing prices,” also in the report.
Source: ISBnews
