Housing price increases will slow down if the battle with funds buying apartments for rent is successful, and interest rate hikes will limit lending – HRE Investments expert Bartosz Turek wrote in an analysis published on Wednesday.
- The main reason for the increase in housing prices in Poland is – according to Bartosz Turek from HRE Investments – the activity of investment funds
- They can buy out entire estates and even development companies
- The reduction of prices should also contribute to, inter alia, more expensive loan installments and a large number of new investments prepared by developers
- More such information can be found on the main page of Onet.pl
The analyst, citing the latest NBP data, wrote that the average meter of a new apartment in the seven largest markets has increased by over 10 percent during the year.and in the case of second-hand housing, the normal average derived from notarial deeds increased by 7.3%. He noted that in recent quarters a number of factors contributed to the increase in prices, including the fact that real estate is seen as a safe haven for capital and a weapon against inflation. According to the Turk, the increase in prices was also influenced by the dynamic increase in wages, a very efficient reconstruction of the economy and the growing optimism of his countrymen. The lowest interest rates in history were of key importance for the increase in prices, he stressed.
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According to the analyst, the demand stimulated in this way entered a market where there was a shortage of offers, as some developers stopped starting new investments at the beginning of the epidemic. The most important, however – in his opinion – the reason for the more expensive apartments is the high activity of investment funds (mostly foreign), which buy not only individual apartments, but also entire blocks, housing estates or even development companiesthus limiting the market offer. He recalled that the government has announced a fight against this phenomenon.
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According to the Turk, there are indications that some of these factors will lose at least some of their momentum. It can already be estimated today that as a consequence of two interest rate increases, as a result of which the base rate went up from 0.1 percent. to 1.25%, housing loan installments should go up by about 16-18%. Creditworthiness also fell by this level more or less.
“This obviously has to translate into lower demand for flats. At the same time, soon this change will be partially amortized by the act on loans without own contribution signed by the President,” he wrote. He pointed out that as a consequence of the interest rate increases, the banks finally started to raise interest rates on depositsas a result, the interest rates on deposits will soon cease to be several dozen times less attractive than the potential profits from renting flats.
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The analyst recalled that in 2020, banks clearly closed the taps with loans. Only at the beginning of this year, the two largest banks re-provided loans with 10 percent. own contribution, which triggered deferred demand. Referring to the data, BIK indicated that this additional demand peaked in May.
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“At that time, banks received about 2.5 thousand loan applications every working day. In the following months this wave was falling. As a result, in October we can already speak of about 1.86 thousand loan applications per day. This suggests a normalization of the situation and the fact that that deferred demand has largely been exhausted, “he wrote.
The expert believes that the phenomena that may lead to balancing of demand and supply can also be found on the other side of the market. “Developers have many new investments in preparation. For example, the latest data from the Central Statistical Office of Poland shows that in the 10 months of 2021, developers received building permits for over 174,000 apartments and started the construction of almost 141,000 units. In both cases, this means an increase of over 30%. compared to the same period a year ago “- we read.