It’s really happening – housing prices are falling. An interesting mechanism is at work

As it results from the analysis of the offer prices of apartments put up for sale in June this year, the average offer prices of apartments in most of the largest Polish cities have fallen in the last month. The largest – by over 1 percent – ​​average prices fell in Szczecin, Bydgoszcz and Poznań. The same – in percentage terms – decreases of 0.6 percent were recorded in four cities: Warsaw, Kraków, Lublin and Olsztyn. Minimal but still price drops also occurred in Łódź, Wrocław and Katowice.

There are no takers, so they lower the prices

In a month-on-month comparison, the average offer prices of used apartments in Gdańsk and Białystok increased slightly, by 0.2%.

– The results of the latest analysis confirm that there is no way to stop the ‘invisible hand of the free market’ (unless it is unnaturally ‘twisted’ by government subsidy programmes). The growing number of offers to sell apartments, combined with a simultaneous drop in demand, is a direct path to price reduction. If there are more and more offers to sell a product, there are no buyers, and one or another bidder urgently needs cash for various reasons, there is no other way to attract a customer than to tempt them with a more favourable price. When one, two or three bidders decide to make such a move, over time the others begin to verify their expectations and also make price concessions, sometimes more openly, sometimes less openly (e.g. a reduction in the offer price only during direct negotiations with the customer) – notes Marcin Drogomirecki, real estate agent.

How does it all work in practice? In his opinion, it can be seen that the offers that have been waiting for buyers for a long time are getting cheaper.

– The lack of phone calls, the lack of people willing to even view the offered premises increasingly often convince owners to lower the starting price. The situation is different in the case of owners who are just deciding to put up their offer; people who are starting the sales process, often unfamiliar with the current market situation, value their apartments above the average for which similar premises are offered. And here again – with time, expectations are confronted with reality and the originally set price is verified – says Drogomirecki, citing his observations.

There is a chance for further price drops

The declines in average offer prices recorded in June are probably the beginning of a longer period of price corrections, both on the secondary and primary markets. This is supported by the constantly growing number of offers for sale of apartments, a high price ceiling that is inadequate to the level of salaries (artificially raised by the BK2% program), high interest rates on mortgage loans (high monthly loan installments, often higher than the rent for a similar premises), a decrease in the attractiveness of apartments as an investment (low ROI, difficulties in finding a tenant, a vague perspective of an increase in the value of the property) and the satisfaction of part of the demand by the BK2% program.

The impact of another possible government loan subsidy program on the housing market is difficult to predict; neither the time of its entry into force nor the final terms that would allow for an assessment of its actual attractiveness, an estimate of the real group of potential beneficiaries and the market segments that would be most affected are known).

The government is digging up the “Start-up loan”

The situation is starting to stabilize itself, but it may be disrupted by the government’s moves, which dusted off the “Startup Credit” project. It will go to parliament right after the holidays – announced Deputy Minister of Development and Technology Jacek Tomczak in the Senate on Wednesday. He added that the ministry wants the act to be passed this year and the program to enter into force on January 15, 2025.

– Many Poles are waiting for this solution. We assume that the bill will most likely appear in parliament right after the holidays. We would like the act to be adopted this year. We plan for these provisions to enter into force on January 15 – said Jacek Tomczak, answering questions from senators.

The deputy head of the ministry added that the project is being processed and will be submitted to the Standing Committee of the Council of Ministers in the coming weeks. – This is a multi-year loan, in the 0 percent variant, addressed to families with children. The idea is to support those families that have not yet purchased their first apartment. And let’s remember that the cost related to mortgage interest in the Polish banking system is one of the highest in Europe – Tomczak noted, indicating that this is the main barrier to families obtaining their first apartment.

Tomczak noted that the ministry plans to operate the “Start Loan” for several years, which is to contribute to increasing the availability of apartments. “We want to create a solution that is not temporary, but at least four years long, which will stabilize the situation,” he emphasized.