Apartments are selling for bargain prices, but will residential investments bring the expected return? Mateusz Gołąb / WBJ

Significant drops in home prices are one of the most visible signs of the global economic crisis in Poland. Low housing demand and growing financial problems among developers have furnished ample opportunity for bargain hunters with access to funds, and this has been reflected in sales growth since the beginning of the year.

On the face of it, the situation seems ripe for the re-entry of speculative investors to the Polish market. But according to real estate market analysts, this is not the case, since no significant increases in residential property values are forecast for the upcoming months.

Individual, not speculative

Attractive apartments for a good price abound - but don't count on a huge, quick return Mateusz Gołąb / WBJ

“Currently investors are not counting on large and quick profits. The prosperity we saw two or three years ago will probably not return any time soon,” said Paweł Grząbka, president of the management board of CEE Property Group. He added that falling prices and still-high renting costs mean that a well-located property can be seen as an attractive investment.
“There can be no talk of speculative purchases, however, as prices will probably not go up in the near future because of large supply and low demand,” Grząbka said.

Ober-Haus analyst Małgorzata Pajor was of a similar opinion. She said that the current market situation offered attractive purchasing conditions, but noted that purchasers were mostly individuals who had been waiting for the right moment to buy their own apartment and had, to a large extent, financed the purchase with their own funds. “Speculative purchases account for only a marginal percentage of all purchases,” said Pajor.

According to Rafał Renduda, a partner at real estate consultancy FYI – RE Independent Consultants, there have been recent cases in the market where investors have been interested in purchasing a larger number of apartments from a particular developer in the hope they could negotiate sizable discounts. Many developers, however, have already abandoned such practices because they have been generating competition for themselves, he stressed.

Slow, cyclical recovery

Market analysts now predict that the residential market situation is not going to spark a speculative boom any time soon. The situation of the last three years, which often involved a “buy today, sell tomorrow for 30 percent more” mentality, is a thing of the past, said FYI’s Renduda.

“One should prepare for a gradual, cyclical increase in property values and take periodic downward movements into account,” he said.

A potential revival could emerge at the end of the current financial crisis, said CEE Property Group’s Grząbka, but he added that no spectacular increases in prices were to be expected. Prices are still high when compared to salaries and growing supply will probably yet force them down by a few more percent by year’s end.

“An increase in prices caused by a lack of new homes is probable in the upcoming years. It is not going to be rapid, however; inflation and difficulties obtaining bank loans may weaken demand,” said Grząbka.