High-price housing
Developers are scrambling to meet demand from the most affluent customers for homes in the center of Warsaw, and to satisfy the growing middle class' appetite for residences in the city's peripheral districts and suburbs. Though growth in prices may level off within the next 10 years, market realities mean a slowdown is nowhere in sight
As demand for homes in Warsaw remains unquenched by supply and prices rise, three main segments have come to dominate Warsaw's residential development market: the luxury segment in the city center, high and mid-range segments in districts further from the center and a more expansive mid-range segment cropping up on the fringes of the city.
Capital developments
Developers such as Orco, Ghelamco, Atlas, Dom Development, GP Investments, Acciona and Pro-Urba are all building major residential projects in Warsaw's Centrum district as well as the adjacent Wola and nearby Mokotów. These developments consist mainly of apartments ranging from 70 to 300 sqm, constructed with the highest-quality materials according to innovative architectural concepts - skyscraper residences are becoming a new trend, ushered in by Orco's prominent Złota 44 and Atlas's Platinum Towers. Residents of these prime properties will be provided with top-end amenities such as advanced security outfits and building management systems, underground parking, full concierge services, spa facilities and often some retail services as well.
The widespread shift to luxury residential development - beyond the often-bewailed shortage of labor and building materials, combined with municipal bureaucracy that imposes significant delays on a project's inception - is related to rising land prices in prime areas of the city. There was a two- to four-fold increase in prices paid for land over the past year. The skyrocketing investment costs are pushing developers to raise the standard of their offers in order to maximize their profit margins.
"Developers can't afford to offer mid-standard homes on such expensive land because the base selling price per sqm would already be out of the price range for the average homebuyer," says Paweł Grząbka, a member of the board at CEE Property Group. The price per sqm in the capital's central districts currently ranges from zł.10,000-30,000.
Outside the center
On the other hand, residential enclaves situated outside the immediate center in highly desirable areas, such as Wilanów, Powsin, Konstancin and the greater Mokotów area of Zwirki i Wigury, give slightly more bang for the (still rather large) buck. Investors like Prokom, Mill-Yon, Dor, BSR and Delpha are involved in ambitious development projects in Wilanów, spanning dozens of hectares of greenery and delivering high-grade construction and amenities - even shopping centers and pre-schools. Dor, Sando, Lubasa, Bouygues and Ghelamco are also working on their own large-scale projects in areas like Ochota, Wola, Żoliborz and Mokotów. These projects require extensive investment, planning and time, which often means that homebuyers will most often have to wait several more years after moving in before they see the full result of the lavish promises made by investors.
However, Grząbka also sees a growing number of homebuyers looking even further afield, to historically less popular districts and even to more remote areas on the outskirts of the city for the best deals. Homes in these areas are significantly more affordable, however they often do not offer the exclusive amenities that buyers have come to expect in the center. These areas include neighborhoods along the transit network covered by the extension of the subway lines, such as Kabaty and Bemowo. Tarchomin, Targówek, Bielany and Białołęka are also seeing a great deal of development, along with suburbs outside the city such as Zielonka, Zàbki and Wesoła. These areas are gaining popularity since their recent incorporation into the city's municipal zoning plans and the completion of infrastructure installation.
The price per sqm for a home in the suburb of Wesoła, for example, is about zł.4,000, compared with close to zł.38,000 in the city center, which saw an increase of over 40 percent over 2006. The average weighted gross price throughout the city was zł.7,900 in Q1 this year. The greatest increase in price was seen the districts of Wawer, Praga Północ and Bemowo. Prices in historically the most prestigious districts (Żoliborz, Mokotów, Wilanów) saw the smallest increases.
Falling short
Nonetheless, as the supply of homes continues to fall short of demand for the next several years, prices will continue to soar. According a recent report from CB Richard Ellis, the forecast for residential delivery in Warsaw for 2007 anticipates an increase in finished homes to reach roughly 17,000 - a slight improvement over the previous year (13,543) but not significant enough to meet the demand spurred by higher rates of employment, growing wages and greater mortgage availability.
According to Mikołaj Martynuska, director of the residential department CB Richard Ellis Poland, Warsaw is 50,000 apartments short of demand. The number rises to 100,000 if the thousands of apartments requiring renovation or replacement are taken into consideration. "Warsaw's demographics will continue to develop and apartments are needed urgently to house the growing population," Martynuska says. A mass influx of people into the city is a certain reaction to a job market that is promising high growth over the next few years.
Large-city growth
Experts see no relief in sight for the strain that skyrocketing demand is putting on the market. According to CEE Property Group figures, prices will continue to rise in Warsaw at a stable rate of 20 percent a year, while growth in cities like Kraków and Poznań will vary from 10-20 percent. Martynuska says the largest leap is expected in Poznań, where prices will surge to 50 percent next year and level out to 20 percent in following years.
Experts say Łódź will also see an increase of 25-35 percent next year and a leveling out to 10-20 percent thereafter. Smaller cities like Kielce and Lublin will see similar growth. Agglomerations such as those located in the Silesia, Tri-city and Katowice regions, will see the development of large-scale "village" complexes.
There is also a trend of building homes on the sites of recently completed gargantuan shopping complexes such as Manufaktura in Łódź, Galeria Legnicka in Wrocław and Silesia City Center. In addition, coastal areas such as Gdynia, Sopot, Świnoujście and Hel are getting high-standard homes for both all-year residents and seasonal ones looking for sophisticated summer homes.
Euro 2012
Certainly, cities included in the plans for Euro 2012 will see expansive development in infrastructure and commercial projects, which will carry over into the residential market and produce a price hike in the sector as well, exceeding projections made earlier in the year.
The number of developers on the market is expanding as more and more foreign investors are bringing their residential know-how to the Polish market from all over the world.
Amendments to tender laws and the bureaucratic process involving building permits combined with expedited zoning for a city in dire need of planning are all factors that will improve, and speed up delivery of housing for the capital's swelling population, stabilizing the market within the next five to 10 years.
