6 factors that will influence the costs of building houses in 2024

Wojciech Rynkowski from Extradom.pl, a website offering house designs, has prepared an analysis of six factors that will affect house construction prices in the next two quarters. Some of them are directly related to construction, others concern the entire economy. Their impact, although it may seem non-obvious at first glance, will certainly be felt.

What will affect the costs of building houses?

1.Loan subsidies – according to Wojciech Rynkowski, the biggest unknown for the real estate market is the new mortgage subsidy program announced by the government. Despite the loud announcements, it is not certain whether it will come into force, much less when it will happen. – After the experience with the 2% Safe Credit, legislators included several safeguards in it that are intended to limit increases in apartment and house prices, especially in attractive locations – he believes.

We wrote a few weeks ago that Donald Tusk's election campaign promise will not be fulfilled. Not only the coalition partners, but even some MPs from the Civic Platform are reluctant to subsidize the loan. The reason for rejecting this form of support is the negative effect the program had on the real estate market last year: anticipating an increase in interest, developers, and consequently sellers on the secondary market, increased the price. And they were not wrong, because buyers, tempted by the subsidies, started shopping.

The selection was relatively small in the second half of 2023. For over 2 years, significantly fewer apartments have been put into use than before the pandemic, which was the result of first slower progress due to the pandemic, and later high interest rates, which significantly limited the credit possibilities of Poles.

Due to the small offer, sellers could afford to raise prices. In October last year, we reported that the price of apartments in Krakow had increased by 28 percent within 12 months. In Katowice, prices went up by 23 percent, in the Tricity by 19 percent, in Warsaw by 18 percent, and in Poznań – by 13 percent. Linking this to the loan subsidy program, which only a few people could benefit from (several conditions had to be met), is not an exaggeration.

2. Energy prices – the production of most construction materials is highly energy-intensive, therefore any increase in energy prices will potentially, to a greater or lesser extent, translate into an increase in the prices of construction materials.

This mainly applies to products that are needed on the construction site in large quantities, such as steel or cement, which affects the final cost of concrete. For now, data published regularly by the PSB Group indicate price stabilization for most products, and even declines in some categories, which gives rise to cautious optimism. We can only hope that this investor-friendly trend will continue for a long time.

3. The situation in Ukraine – it is also a completely unpredictable factor that can be divided into two parts. The first is the availability of employees from our eastern border. The recent actions of the Ukrainian Ministry of Foreign Affairs, which de facto forces men of military age to return to the country in order to renew their passports, will certainly have an impact on the number of Ukrainians who work on construction sites today. A smaller number of experienced workers means greater competition between contractors, which in turn allows us to assume that the salaries of construction teams will go up.

Another element is the situation at the front. Stabilization or a turnaround in Ukraine's favor will certainly have a positive impact on the mood of investors in our country. Any deterioration of the situation of our eastern neighbors will translate into increased uncertainty and, consequently, less willingness to invest, especially in the east of the country.

4.Prices of building plots – it is difficult to imagine any construction without an appropriate building plot. Land prices, especially in an attractive location, are one of the most important items in the budget of any investment. They are also a good barometer of the mood in the construction sector. Rising land prices mean that developers and individual investors are planning further investments, which again means that there will soon be more available premises on the market.

– Plot prices are an important element of market balance. Apartments and houses are fungible goods. This means that they meet the same needs, so a sharp increase in the price of one good will result in a rapid increase in interest in the other. Such a phenomenon could be observed last year. The rapid increase in housing prices began to be accompanied by rising prices of building plots. If this trend continues, it will mean that a large group of individual investors have concluded that apartment prices are overestimated and it is worth investing in building their own house. If building land becomes too expensive at the end of this year, interest in apartments will increase again, notes Rynkowski from Extradom.pl.

5. PLN exchange rate – the strengthening domestic currency against the dollar and euro favors investors. Energy carriers are becoming cheaper, which translates into stabilization and even a decline in the prices of building materials. The prices of all imported equipment necessary for building and furnishing a house are also falling. At the same time, the profitability of exports decreases and the attractiveness of sales on the domestic market increases, which translates into greater supply, lower price increases and – above all – wider availability of all products, which increases competition and further reduces prices. All the above-mentioned factors benefit domestic investors who earn in Polish zlotys.

Our currency has been losing value for a few days now, but this does not have to be a permanent trend. The previous few weeks had been particularly good for her, so one hopes this is a temporary situation.

6. Investments financed from KPO – a number of investments carried out as part of the national reconstruction program may pose a problem for individual investors. In my opinion, this phenomenon will become noticeable on the market at the end of the year. A large number of projects and often a huge scope of investments financed from KPO funds will increase competition on the construction market. Investors will be looking for both qualified construction teams and materials necessary to carry out extensive works.

Will real estate become more expensive in 2024?

Finally, a question that worries everyone who dreams of buying a flat or house: will we see further record increases in real estate prices in 2024?

– I am convinced that in 2024 housing prices will grow above the inflation level, but significantly slower than in 2023. In my opinion, both the generally good economic situation and the conclusions from the BK2% summary will contribute to this. This is visible in the actions of developers, individual investors and legislators planning another housing subsidy program #naStart. I assume that annual housing price increases will range from 12 to approximately 22 percent. depending on the region. The costs of building single-family houses will grow more slowly, from 8 to 15 percent. on an annual basis. Of course, this does not apply to premium investments located in particularly attractive locations. These are governed by their own, separate laws – sums up Wojciech Rynkowskiekspert Extradom.pl.