Tough times for developers ahead
A market in which supply outstrips demand will drive prices further down for the majority of homes, according to a report by market-research firm PMR. The price correction is expected to last at least until the 2009 holiday season. According to the report, transaction prices will fall by approximately 10 percent on average over the whole of 2008.
Over the coming two years, developers operating in Poland will be faced with the negative consequences of the residential construction boom of 2006-2007, when up to 20 percent of all housing units were sold to entrepreneurs intending to sell them on at a profit. Additionally, rising costs of housing projects and the stagnation in sales of housing units may result in bankruptcies of mismanaged developer companies. This will pose a serious threat especially to smaller developers without a large equity base.
Despite the slowdown in the developer segment, producers of building materials will not be seriously threatened, due to considerable activity in the segment of independent home construction. While it is increasingly infrequent in Western Europe for individuals to build their own houses, in Poland it accounts for almost half of the entire residential construction market and will act as a stabilizing factor for the market as a whole.
The publication forecasts growth in the residential construction segment until 2010, driven by strong home sales in the primary market in 2006-2007. In 2008, the number of housing completions will near 170,000, and will continue to expand in subsequent years, topping 200,000 units in 2010. In the context of reduced demand, many developers will soon suspend their planned projects. But this will begin to affect housing completions only in 2011.
"The year 2008 will be the first ever when developers contribute more housing completions than individual investors. In the long-term perspective, the share of housing completions contributed by developers will grow markedly, especially when the stagnation in the primary market is over," said Bartłomiej Sosna, a construction market analyst at PMR.
