Residential construction on the brakes in Poland
According to the Central Statistical Office (GUS), residential construction has entered a period of slowdown. The downturn in the broadly defined housing sector is also evidenced by declining sales by developers and data from the mortgage market.
Residential construction in Poland in early 2022
According to preliminary information from GUS, in the first quarter of this year, the number of residential projects commenced was by 16 percent lower than in the corresponding period of 2021. Even more (-21 percent) activity in this field was limited by developers, who are responsible for 2/3 of new projects. From January to March, the offices issued 8 percent fewer building permits.
According to experts, in the following months and quarters there will be further decline in residential investments.
However, this will not immediately translate into a decrease in the number of units handed over for use. The number of units under construction remains the highest in history (around 260,000).
This results from the specific character of the residential construction industry. Professional construction companies complete a project in two years (not counting the time needed for administrative procedures).
Declining apartments and mortgage sales in Poland
What is the reason for the declines? The construction sector is adjusting supply to a weakening demand. The demand is weakening due to the dynamic growth of real estate prices and higher interest rates.
This translates into more expensive housing loans and a decreasing creditworthiness of customers. The number of those who can afford to get into debt to buy their own apartment is decreasing.
According to the BIK, during the first three months, compared to the same period in 2021, clients took out 18 percent fewer mortgage-secured obligations. For several months, the number of applications for new mortgages has also been decreasing.
As a result, sales of new apartments are declining. Data from GPW-listed developers, which represent only a slice of the market but are usually very accurate in showing trends in residential construction, shows that customers bought 23 percent fewer units in Q1 than a year earlier. Compared to the last quarter of 2021, which was also weaker than the multi-year average, the drop was 11 percent.
As indicated by the specialist website RynekPierowtny.pl, the entire industry recorded lower sales in February by 39 percent year on year. In March it was even worse (-47.5 percent).
Housing construction under war pressure
The uncertainty caused by Russia’s aggression against Ukraine also contributed to the decline in demand for apartments. In addition, the war has increased the already high volatility of energy and raw material prices, of which residential construction consumes a lot. This makes it difficult for contractors to plan costs. The conflict across the eastern border has also limited the availability of certain materials.
The difficult situation has affected smaller entities the most. Many of them are struggling with the outflow of workers from Ukraine. According to the industry organization PZPB, this may cause a wave of bankruptcies in the sector.