The past decade of residential development has seen a boom, a crash and a rather strong and rapid recovery. WBJ Observer asked Radosław Bieliński, press officer of Dom Development, where the market is now compared to 10 years ago
Interview by Beata Socha
WBJ Observer : How much has the residential market in Poland changed over the past decade? Is it getting closer to being mature?
Radosław Bieliński: If we want to compare Warsaw to cities like London or Paris, we still have a long way to go. Twenty years ago we had mostly Social Housing Associations (in Polish TBS) doing the development. After 1990 the market slowly moved into the hands of the developers. Each year the market is maturing, getting us closer to Western Europe. We see more coherent and well thought-through urban planning in Polish cities that makes residential development more in tune with the fabric of the city. Besides, supply and demand continue to be balanced. Over the last two years, developers have achieved the biggest sales volumes in market history.
In the boom preceding the crisis, that is in 2006 and 2007, it was the norm to buy an apartment long before the construction was completed. Then, soon after the crash, Poles had plenty of completed projects to choose from. Where is the market now?
We have a very healthy market now and clients have no fear of buying apartments at the early construction stage. This way they have a wide range of apartments to choose from and can select the layout of the apartment they like the most.
In most of our projects we sell above 90 percent of all our apartments at the construction stage, which on average takes 18 months. People trust developers that have been in the market for many years and that survived the 2008 housing market crash.
How have your clients’ expectations changed over the past decade? Have you noticed any signs of them getting wealthier?
While the percentage of apartments in the popular segment and in the upmarket segment have not changed, we do see that Poles buy more and more turn-key apartments. They also pay more attention to the quality of the materials used in the building, for the facade finishing, e.g. glass, stone and wood are valued more. They have become more demanding and willing to pay if the building is what they are looking for. Therefore, developers are creating living spaces that correspond with new generations’ needs and lifestyles.
And what are they looking for in terms of the size of the apartments?
Before the crisis, banks were happy to give large loans, with little or no down payment. Apartments then had bigger rooms than they do now. During the crisis, people started thinking more rationally: would I rather have three large rooms or four smaller ones? The market has shifted towards a more effective use of space, with more rooms fitted into the same overall area.
Which apartment sizes sell the quickest?
In our case, similarly to the market, the 40-50-sqm units are currently on top. These units constitute about 55 percent of an entire project. Our clients are mainly young people, with the average age being 31. They are often at the beginning of their adult lives when they purchase their first apartment. They live in it for a few years and then they swap it for a bigger one. About 10 percent of our offer is 4-5 room apartments and they are also in demand, as they sell rather quickly. They are for larger families.
How many of your clients use the MdM government subsidy program?
Currently, we have MdM apartments in four of our Warsaw housing estates. The number of these apartments depends on the current limits and varies from one quarter to the next. There were months when we had several hundred apartments in the MdM scheme, sometimes only 100 or so. In Q1, some 15 percent of the apartments we sold were financed with the MdM scheme.
The MdM program is not essential to our activity as our average transaction value strongly exceeds the market average of PLN 350,000. As much as 72 percent of our transactions go beyond PLN 350,000, including 21 percent of purchases worth over PLN 550,000. Additionally, we assist our clients in selecting the best mortgage offer as we have an in-house Credit Advisory Department. Over 80 percent of our customers take advantage of our advice.
How many of your clients pay in cash?
Compared to other competitors, we have higher prices, which in turn translates into a higher number of clients buying with cash rather than with bank loans. About 25-30 percent of all our apartments are paid for in cash. In the first quarter, the number of clients buying in cash increased to 35 percent. u