Residential market / Buying prestige
WBJ talked to Andrzej Sychowicz, the management board president at residential developer APM Development, about upscale housing projects and the company’s plans in the sector. Interview by Adam Zdrodowski
WBJ: APM Development is now working on an upscale project in Warsaw called Cristal Park Residence located in the prestigious Mokotów district. Will the company become more active in the premium residential sector in the near future?
Andrzej Sychowicz: Yes, making a stronger presence in the premium sector is part of our business strategy for the coming years. We have always had a vision of what an upscale residential project should look like, but the market has not always allowed us to build what we wanted to build. We feel that now is a good time to start premium schemes in Warsaw as the market here has matured and there are more and more potential buyers ready to pay PLN 15,000 PLN 20,000 per sqm for a high-quality apartment in a prestigious location.
What will be the share of premium schemes in your portfolio?
Premium projects will not dominate in our portfolio and they will not be huge schemes. Of course, this segment of the residential market will never be as large as the market for affordably priced apartments, but that is not a problem for us. We are not a big listed company which has to sell thousands of apartments annually to please investors. We are a mid-sized family business and we want to develop quality investments that give satisfaction to us and our clients.
We come from Warsaw, see ourselves as local patriots and want to contribute to the further development of the city by delivering well-designed buildings and creating nice neighborhoods. Our Cristal Park Residence project, for instance, is located in an area of the Mokotów district of Warsaw that is defined by low-rise buildings and abundant greenery, and thus reflects, to some extent, the urban planning ideas of the garden city movement dating back to the first half of the 20th century.
Do you also want to develop luxury schemes?
No, luxury residential projects in Warsaw today most often entail the development of high-rise buildings, which are too big for our scale of operations, or the renovation of historic properties, which is challenging and requires very specific know-how that we do not have.
Have apartment prices in the premium sector increased of late?
When it comes to Cristal Park Residence, we have actually launched sales very recently – at the beginning of this year, even though the project has been under construction since September 2018 – so we have not yet had a chance to increase the prices in the scheme. However, to be honest, I do not expect the current prices to go up by the time the development is completed. As for the market in general, apartment prices have indeed been on the rise and will likely continue to go up this year.
Admittedly, this is mostly visible in the low-end market segment where some developers have even put projects on hold as rising construction costs
have made them barely profitable. In the premium segment there is less upward pressure on prices as developers’ margins are bigger and there is more room for maneuver. On the other hand, prices of premium and luxury apartments are not as strongly linked to construction costs as those of low-end units. Buying a premium property is also about emotions, snobbism and prestige.
Do purchases for investment purposes still play a major role in the premium sector?
Yes, by all means. In the premium apartment segment, the vast majority of purchases – and we are talking about transactions valued at more than PLN 1 million – are financed with cash. Residential property remains an attractive investment alternative – in the long-term, it always allows you to make a profit. It’s enough to look at how apartment prices in Warsaw have changed over the last 10-15 years. We saw a major crisis a decade ago, but the prices have since then rebounded with the current levels exceeding those recorded in 2007.
Who is the typical buyer of premium apartments in Poland?
Most of our clients are affluent Poles who either want to safely allocate the capital they have accumulated over years or are looking for high-quality living space for themselves. Of course, clients in this market know what they want, are very demanding and have high expectations.
What are some of the latest technological solutions found in upscale residential projects?
Solutions such as remotely controlled lighting and heating systems have already become pretty much standard in this market segment. We want to focus on air quality in our premium projects. The apartments in Cristal Park Residence will be equipped with an air cleaning system – we can say that they will basically be smog-free. More and more clients, especially those in their 30s and 40s, are also asking about charging stations for electric cars – we will provide this solution in our Mokotów scheme.
What are your further plans in the premium sector?
We have already bought a site for another premium project in the Mokotów district and we are constantly looking for land for more such schemes in Warsaw. We expect that construction work on the new Mokotów development will launch in the second half of this year.