A seller's market

The latest report from Reas, a Polish real-estate investment consulting firm, examines the sources of the residential property deficit in Warsaw and its effects on the market. Properties are being snatched up the instant they go on the market, driving prices to alarming levels - more than 40 percent higher over the previous year. Buyers from the moderate-income bracket, especially, are bearing the brunt of the housing crunch.

The main reason for the boom is the gap between the supply of finished homes and demand, which is the result of a number of factors, from limited land availability to extensive bureaucratic delays. In addition, there is the issue of "withholding" on the part of investors who hope for further growth and greater profits if they sell later. While the number of buyers is rising - thanks to rising employment, and easy access to mortgage loans - the number of residential units offered on the market in 2006 wasn't significantly higher than the year before. The same goes for the number of construction projects initialized, in spite of the building frenzy that was predicted for 2006.

With land prices at record levels and construction expenses soaring, investors are focusing on maximizing revenues by diversifying a limited provision of apartments for affluent buyers. There is a shortage of more affordable housing both within the city limits and out in the suburbs.

The 2007 residential market is not expected to fare much better. Supply of finished units should increase, but not enough to meet the demands of the market. A leveling-off of prices is expected over the next two to three years. "At that point, the pace of the market will slow down ... but this is largely dependent on the economic climate and consumer confidence, as well as the ability of developers to significantly increase the number of units they put on the market," said Kazimierz Kiejczyk, Reas' president.