Housing prices may fall nominally by 5-10%, depending on the market segment, according to Polityka Insight chief economist and co-author of Otodom and Polity Insight’s “Housing Quarterly” Adam Czerniak.
“After six to seven years of uninterrupted increases, apartment listing prices have stopped rising. It’s too early to say that a downward trend in the housing market has begun, but for the moment we have a deceleration of increases,” Czerniak said during the presentation of the “Quarterly”.
“In the coming months, we are unlikely to expect price increases or a return of this upward trend, even declines are possible,” he added.
He then referred to real housing prices, adjusted for the general price level of goods and services in the economy, and nominal prices.
“This downward trend can already be seen, and it favors a return to balance in the housing market. […] My expert forecast is that we can still expect small nominal declines, probably 5 to 10%, which means that prices in real terms […] will fall from the peak, which was in 2021, by up to 25-30%,” he said.
Katarzyna Kuniewicz, who heads market research at Otodom Analytics, was more cautious in her assessment.
“A correction is inevitable. However, the situation will vary greatly between markets. We can count on larger discounts especially in the markets of the smallest cities, where pressure to quickly commercialize investments may prompt developers or retail investors to make reductions. Also in the secondary market, which is more fragmented and dependent on the individual situation of sellers, there may be big bargains that will weigh on the average price. At the same time, in the most receptive markets of large cities, developers will adjust supply to the capacity of buyers who remain in the market, rather than cutting prices wholesale,” she said.
The Quarterly reports that the last quarter of 2022 saw a symbolic but first quarterly drop in nominal housing prices in nearly seven years. This was accompanied by a further decline in turnover, both in the number of new listings and transactions. The demand shock in the rental market also faded. According to experts, the boom in the housing market, which had been going on for several years, came to an end with the end of 2022.
The last three months of 2022 brought the first decline in several years in the listing prices of apartments put up for sale through the Otodom website. Calculated jointly for the primary and secondary markets, it amounted to -0.2%. relative to the previous quarter. Nevertheless, compared to the same period in 2021, average listing prices were still 9.7% higher.
The smallest apartments, up to 40 sqm, became the most expensive – by 1.1% compared to Q3 2022. They also rose the slowest in annual terms (+8.7% y/y). However, they still remain the most expensive per square meter with an average price of PLN 11,361 per square meter. The largest apartments, of which there are far fewer on the market, continue to hold the price level, and those above 90 sqm even became more expensive (+1.0%) in the last quarter of 2022, reaching an average of PLN 10,220 per sqm, the study reported.
Despite the high decline in sales turnover, there is still a large group of people in the market who intend to buy their own M. This can be evidenced by the still high number of apartment searches on Otodom, which remained at 2020 levels in 2022. What has changed is that potential buyers are taking longer to make a decision, as indicated by the increase in the display time of apartment sales listings on the site. In the last three months of 2022, their average exposure time was 91 days, 15 days longer than in Q3 2022 and as much as 33 days longer than a year ago, according to the Quarterly.
The situation is reversed in the rental market, where the race for tenants to attractive offers continues. Although the average time for displaying an ad has increased from 17 to 21 days, it still hasn’t returned to the levels of the quarters before the outbreak of the war in Ukraine.
“The slight slowdown in increases is the result of the extinction of the demand shock associated with the influx of refugees from Ukraine, on the one hand, and the approach of rents to the price limit that tenants are unable to accept, on the other. Despite these changes, however, landlords still have a negotiating advantage in the market. Tenants still have to compete with each other for favorable offers appearing on the market, and relatively few of these appeared on Otodom in the last three months of 2022,” Kuniewicz commented.
The reason for the decline in the number of listings, and especially the so-called reactivations, according to Otodom, may be that tenants are reluctant to terminate current leases for fear of the difficulty of finding a new apartment that suits their needs. The biggest concern is the new rental rates. In the fourth quarter of 2022, the average asking rental price was 28.8% higher than in the same period of 2021. Of course, the rate of rent increases varies from city to city. They continue to grow fastest in metropolitan areas – by 3.3% q/q and 32.6% y/y. This is mainly the result of the high popularity of agglomerations among refugees from Ukraine. On top of that, due to the absorptive market and low elasticity of supply – landlords are more willing to test the possibility of raising rental rates. Such a step is more likely to be taken by those landlords who bought an apartment for rent using a mortgage and are now trying to compensate for the increase in installments.
Otodom real estate service that receives about 4 million unique users each month to browse and post ads for property sales and rentals.
Source: Otodom i Polityki Insight and ISBnews
