What’s behind the boom?

Changes in the Polish housing market

The housing market in Poland has witnessed rapid growth in recent years. In the past 3 years, the prices of residential units (apartments) in major urban areas have risen by an average of 10%.

This has been accompanied by an equally high rate of growth in salaries. In 2017–2020, the average monthly salary in the largest cities went up by over 20%.

We analyzed the housing market to compare the present situation against the previous boom period, back in 2004–2007.

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Is residential space in Poland truly more highly priced today than it was 15 years ago?

How does the present situation in Poland compare with neighboring countries?

Is the Polish market as highly priced as is so widely claimed?

In the recent months, we have been bombarded by news about record-high housing prices. In nominal terms, the price per square meter of residential unit is reaching unprecedented levels. However, to adequately evaluate the market situation, we need to compare housing prices with Polish salaries.

How many average monthly salaries did it cost to buy one m2 of a residential unit in the past 16 years?

Gross price components per residential m2 in Warsaw in 2008 and 2021

The key components of housing prices that considerably affect the final sale price include the costs of construction and land purchase, as well as the developer’s margins.

Much like back in 2008, construction costs are still the main determinant of today’s housing prices (even though their percentage share has diminished due to a slower pace of growth).

In contrast, when we compare the year 2008 to the present situation, it was the cost of purchasing land that made the greatest percentage contribution to rising housing prices.

The limited supply of land with clear-cut legal status, lack of zoning plans and longer administrative processes are the reasons why plots with valid planning permissions are fetching the highest-ever prices.

Despite the record demand, the developers’ margins have for years remained at a stable level (in %), due to strong competition on the housing market, among other factors.

2008

Q2 2021

The real estate market is currently in a strong growth phase. The present market outlook should not be surprising to anyone due to the cyclical nature of the real estate market. Even though the external circumstances have changed compared to the past, the fundamentals of growth remain the same.

Kinga Barchoń
Partner, Real Estate, PwC Poland
Poland
Germany
Czechia
Sweden

How many average monthly salaries does it take to buy one m2 of a residential unit

1,11
0,85
1,96
1,2
Warsaw
Berlin
Prague
Stockholm

Average price per m2 of a residential unit in Warsaw (2020)

EUR
2 220
EUR
3800
EUR
4900
EUR
7260

How many average monthly salaries does it take to buy one m2 of a residential unit (2020)

1,41
0,88
2,7
1,73
Sources: GUS, AMRON, Czech Statistical Office, German Federal Statistical Office, Statistics Sweden, EUROSTAT currency rates as at 31.12.2020

Poland has one of the lowest ratios of residential units per 1000 inhabitants – being nearly 100 units lower than the EU average. Given the low per-capita number of residential units and also their smaller floorspace than the EU average, Poles generally live in small, cramped apartments.

Poland
Germany
Czechia
Sweden
EU

Number of residential units per 1000 inhabitants in 2020

393
515
468
487
491

Average number of persons per unit in 2020

2,8
2
2,3
2
2,3

Average floorspace per resident in 2020

29,3 m2
45,56 m2
40,63 m2
42,09 m2
42,56 m2

% of the population renting a unit in 2020 (change since 2010)

14,4%
(- 4,3 p.p.)
49,6%
(+ 3,8 p.p.)
21,1%
(+ 1,2 p.p.)
35,5%
(+ 2,8 p.p.)
30,2%
(+ 0,9 p.p.)

Despite the robust market expansion in recent years, the housing gap still remains at the level of 2.2 million residential units.

Supply needs to increase to help redress the housing shortage. Here, the development of the build-to-rent market could be an answer. By being able to build housing for long-term rental in areas zoned for services, developers could increase the supply of residential units without limiting the purchasing potential of private individuals.

Poles do still prefer ownership to rental. Only 14.4% of Poles live in rented apartments, a figure much lower than the EU average. The development of a professional institutional rental market, together with the entry of many foreign funds specializing in the rental market to Poland, could encourage Poles to increasingly consider renting apartments as an interesting alternative to buying their own.

Safe form of investment

Due to the relatively young age of Poland’s free-market economy traditions, coupled with low investment awareness on the part of Poles, the housing market is perceived by 58% of Poles as a safe form of capital investment, providing a way to protect capital against inflation.

Poland’s lack of an investment vehicle in the form of REITs (Real Estate Investment Trusts) is certainly one of the factors behind the growing popularity of residential property.

The housing market is only one of the segments of the property market, and is one characterized by a relatively low entry barrier. At the other end of the spectrum is the commercial property market, with huge, multimillion-euro projects which are beyond the reach of the average investor. This is the reason why REITs could serve as a vehicle to stabilize housing prices, some of the investment capital shifting to commercial property.

Despite the repeated attempts to introduce REITs onto the Polish market, relevant legislation has yet to be adopted.

chart

Most profitable forms of investment as viewed by Poles, maximum 3 answers, based on a sample of 1124 individuals

Source: Assaygroup, 08.2021, ”Wskaźniki gotowości inwestycyjnej Polaków” [Investment Readiness of Poles – Indices]

Contact us

Kinga Barchoń

Kinga Barchoń

Partner, Real Estate, PwC Poland

Tel: +48 22 746 4178

Michał Bobrzyński

Michał Bobrzyński

Consultant, Real Estate, PwC Poland

Tel: +48 519 505 127

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