27 ottobre 2008

"The crisis in the international financial market has definitely entailed adverse consequences for Polish residential market. Increased interest rates and exacerbated terms-and-conditions of mortgage-backed loan granting will probably result in reduced number of prospective residential unit buyers. A drop in transaction prices of realties can also be expected, down to the level set by lowered creditworthiness of main target groups, although it is rather difficult to foretell today by what specific percentage the prices will fall, in by-city terms.

In Q3, 2008, the mean prices for units launched to the market in Poland's largest cities oscillated between PLN 7,000, as in Wroclaw, and PLN 8,900/sq. m, as in Warsaw. The average price per unit exposed was the lowest in Łódź, at PLN 5,970/sq. m, the highest being the case with Warsaw - i.e. PLN 9,000/sq. m. A shift in the offering is observable across the local markets toward cheaper units, resultant from the offering being tailored to the actual demand structure.

The scale of the new units market will most certainly shrink over dozen-or-so months to come - in terms of number of transactions closed and projects commenced. In order to render it feasible for a prospective buyer to actually buy an apartment, developers will have to embark on some untypical actions, so as to assist their customers in accumulating the upfront deposit as required by the bank. Solutions to be applied may include offering by developers of turnkey apartments, which would enable buyers to use their savings as the buyer's own contribution so required by bankers.

It was already in Q3, 2008 that we could observe in the residential market in Poland a slowdown in developers' activity. In the first three quarters of 2007, they introduced to the markets of the six cities under REAS monitoring (i.e. Warsaw, Krakow, Poznań, Wrocław, Łódź and the Tri-City) a total of 34,000 units, while as for the corresponding 2008 period, the figure was 28,600. The decision to inhibit the supply is justified by decelerated sales. Between January and September 2007, a total of 27,200 units were sold, whilst the number of units sold in Jan. to Sept. 2008 equalled 21,000 - i.e. more than 20 per cent in decrease rate. The number of units available on offer for the six cities in question has increased over the last twelve months more than twofold - to 38,359 units as for Q3, 2008, up from 19,765 units as for Q3, 2007.

All the same, in the six agglomerations under discussion taken together, the number of completed yet unsold units remains 2,350 as of now, which accounts for not much more than 6% of the offering on sale as at present. Today, given the higher risk circumstances, prospects' interest tends to focus on projects carried out by experienced developers and/or those nearing completion.

Aggregated data for the above-enumerated six local markets indicate that 81% units out of those scheduled for delivery in 2008 have already been sold. There are 18 per cent still remaining on offer, with completion dates planned for the present year. The situation of projects scheduled for delivery in 2009 is different, though - with some 45 per cent of the offer having been sold to date. In turn, 12%, i.e. more than 6,000 units with completion date set for the next year have not as yet been launched for sale. It may be presumed that given the present-date market situation, the developers will withhold their launch up until the financial situation gets clarified.

The situation of developers today is diverse, the best standing being enjoyed by large companies, holding a capital enabling them to survive over the few months to come. Again, companies that have not provided themselves with appropriate financing of their projects are put under threat of loss of liquidity, owing to decelerated sales. This might end up in collapse of some developer businesses. Key for their survival in the present-day marketplace conditions will be drivers such as: access to private equity funding; ability to develop a reliable business-plan, allowing to efficiently apply for bank loans, and an efficient marketing and sales strategy to be based upon reliable market analysis" ( CS della Societą).