Building up

The end of 2007 saw cooling in the residential market and some expected the prices to stabilize or fall in some cities in 2008. However, with the prices of building materials anticipated to rise, it is unlikely that apartments will sell any cheaper this year.

The prices of building materials are likely to grow by 10-15 percent, but according to experts we will not see the same situation as in 2007, when prices went up by 100 percent. All building materials are expected to rise, but the increases may be especially noticeable in the case of polystyrene due to the growing price of oil, one of the main components used in its production.

Higher prices of cement, bricks and concrete blocks, meanwhile, may be linked to the new CO2 limits, which have been lowered by 30 percent for 2008-2012. To comply with these regulations, factories will have to reduce production. According to the Association of Cement Producers (SPC), Poland will need some 18 million tonnes of cement in 2008 and approximately 23 million tonnes in the following years. However, with the new limits Poland may be only able to produce 12.9 million.

The increases in prices may be reflected in the prices of apartments, but as Paweł Grząbka, managing director at CEE Property Group, noted, "These increases are likely to be gradual rather than sudden and will not be immediately apparent." Still, despite the slight cooling of the residential market, developers are not likely to offer lower prices.  

"The margin on residential projects is between eight and 17 percent depending on the city. This isn't  much and means there is very little room for lowering the prices of apartments," said Grząbka. He also added that the costs of financing investments are growing, which narrows the margin even further.

Anna Kapica-Harward