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Slightly more than PLN 6.5 thousand per meter - this is the starting price for new flats built by Dom Development at Głęboka Street in Białołęka. This is well below not only the Warsaw average price per square meter (at the end of the first quarter of 2020 it exceeded PLN 10.9 thousand in the capital city), but also below the average for Białołęka (PLN 7.5 thousand). Although taking into account all the flats available within the investment on Głęboka Street (the upper price level reaches over PLN 8.7 thousand), the price will be similar to the district average.

Dom Development made this investment available on the market, while holding another - at Stanisława Augusta Street in Kamionek, near the crossroads with Terespolska Street, on the outskirts of the park by the Exhibition Canal. It is an investment located closer to the city centre, on a higher shelf than the one at Głęboka Street. Here prices and standards will be much higher.

Dom Development's strategy is a good example of what we can expect from the Warsaw housing market in the coming months.

First the supply will fall, then demand, and then finally prices 

- The previous crisis taught us that in the first months new supply is falling the fastest, then demand, and only at the end the price follows. However, the expectation that investments introduced by developers for sale in the coming months will be cheaper is not without reason - explains Katarzyna Kuniewicz, director of the residential market research department at JLL. - However, it is more likely that the geography of supply will change and developers will be more active in peripheral districts and less attractive locations than that there will be a fire sale of flats in Wola, Mokotów or Praga - she points out.

Why will prices not fall? After all, the demand for apartments has slowed down sharply. The Credit Information Bureau reported that in May 2019, banks sent inquiries for housing loans for an amount nearly a quarter lower than in May 2019.

Flats are not bananas, they do not lose their freshness

This is hardly surprising. In the second half of March, when the government introduced restrictions due to the coronavirus epidemic in Poland, the sale of apartments simply stopped. Construction companies closed their sales offices, where there were no customers anyway. Some of the activity moved to the Internet. Not all - sales contracts still have to be signed with a notary. The number of such transactions is a fraction of what was before the epidemic. It was only at the end of May that companies started to open their sales offices again.

Despite this, the developers did not decide to slash prices on their apartments. The residential market is not a grocery store, where bananas that lose their freshness have to be sold immediately at all costs.

For the last seven years, companies building apartments have benefited from a long wave of housing boom. The purchasing power was growing, loans were relatively cheap, jobs in Warsaw were increasing, so the number of people willing to buy a flat was also growing. This was followed by rising prices. In 2019, 24.3 thousand apartments were sold in Warsaw. This was the second best result ever after the record year 2017. The flats were sold on the spot, even though their prices were rising: the average price per square metre at the end of 2019 exceeded 10.5 thousand PLN and was 9 percent higher than in 2018. A year earlier, the prices had risen by more than 13%, a year earlier - by more than 8%. It is hard to believe that still in 2017, the average price per square metre in Warsaw was only about 8.6 thousand, and earlier, for six years, it had fluctuated steadily around 8 thousand PLN.

Developers have already turned off the tap

In the first quarter of 2020, Warsaw developers sold 6.9 thousand new flats. This was the best result for a single quarter in nearly two years. But for months there have been ample warning signs that the economic boom may end, and thus the developers were cautious about introducing new projects. In the first three months of the year, they introduced only 3.7 thousand units for sale, almost half as much as in the last quarter of 2019. Consequently, at the end of March, only 13.7 thousand units remained on the capital's primary residential market. According to the latest JLL report, the last time such a low level of the offer was recorded in Q1 2010.

- We have observed a decline in interest in apartments, which is undoubtedly related to the coronavirus - communicated in April to the media Michał Hulbój, acting president of Develia, a company which is building in Warsaw, among others, the Na Woli development on Sowińskiego street. - We understand that some clients postpone their decision to buy a flat. We monitor the situation on an ongoing basis and try to react flexibly to it.

This means tightening the supply of flats. This is a tried and tested reaction of developers to turbulence on the residential market. In case of trouble, they delay investments, making sure that the choice is not too big. This allows them to maintain prices.

For the last several quarters, the interest in apartments has been very high, customers had no hesitation to buy them at a very early stage of the investment, even before the first shovel was pushed in. As a result, more than half of the apartments to be completed within the next year are already sold. This is the highest pre-sale level since 2008. This basically excludes the possibility that the flats will become cheaper in the coming months.

Will remote working make us start looking for apartments near Warsaw again?

Flats may be cheaper in investments newly introduced to the market - the economic crisis and the local governments' cuts in investments make construction companies face the prospect of fewer orders, so they are more willing to fight for every new contract. Developers are likely to postpone relatively more expensive investments in the city centre, increasing activity on the outskirts and lowering the standard, e.g. with cheaper finishing of common areas.

It should be remembered that Warsaw is the largest and most diversified market in Poland. Average prices of flats range from PLN 7.4 thousand per square meter in Białołęka to 20.9 thousand in Śródmieście. It may turn out that we will see fewer ads for apartments in Mokotów, Żoliborz or even Praga-North in the vicinity of the subway. Maybe the offer will mainly include apartments in Skoroszów, Chrzanów, Zielona Białołęka or post-industrial areas.

It can be expected that developers in the suburban areas such as Piaseczno, Pruszków, Legionowo will become more active, tempting clients with prices that have always been lower than in Warsaw. So far, the barrier hindering the demand for these flats has been the onerous transport to the capital. Today, when many employees of Warsaw companies have switched to remote working, they may be more inclined to consider buying an apartment near Warsaw, as long as they are guaranteed good internet connection. 

- In 2021, the process of official price reduction will begin, mainly due to the entry into the offer of new investments, most of them with lower standard of finish and less prestigious locations - predicts Katarzyna Kuniewicz. The first signs of this approach by developers can be seen with the aforementioned example of Dom Development's decision.

On the secondary market, reluctance to reduce prices

There is also no inclination to reduce the price of apartments for rent on the secondary market or on the rental market. - One of the most important reasons is the attitude of the sellers themselves - explains Bartosz Turek, analyst at HRE Investments. He cites Sonar Home's data, according to which the average offer price has fallen by less than 1% since the beginning of the epidemic in Warsaw. - There are many reasons for this situation. First of all, the real estate market reacts to all changes with a delay. Among other things, psychological factors are involved here. It is simply that owners quickly become accustomed to high valuations and some of them prefer to resign from selling than to sell at a discount. This can be accompanied by health concerns and the fact that some sellers do not want to show their apartments, which limits the offer - says Turek.

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