At first glance, residential construction output in Poland in 2009 seems very good. In total, over 160,000 dwellings and single-family houses were delivered to the market, i.e. 3.1% less than in the previous year. Most new residential units were delivered by developers ? nearly 72,300 units, which is a record-breaking result in over a dozen years of history of this business. And at least another several thousand residential units should be added to this number ? namely, dwellings implemented by small developer companies, ranked in the statistics among private constructions.
Finally, we have seen an increase in constructions implemented by municipalities and public building societies, although in this case slightly over 8,000 residential units is neither a record or a reason to be proud. If this is the construction output of this sector after the largest residential and economic boom in the previous twenty years, then it seems that nothing can help to stimulate this category of investors. Residential boom? Yes, because the currently published statistics reflect investment decisions made in the years 2006-2007 and constructions started in H2 2007.
Where should we search for symptoms of the crisis, then? We must look at the category ?dwellings started?. Here the decrease in the total number does not seem too dramatic: 18% less then in the previous year, i.e. nearly 143,000 residential units, which is a relatively good result for Poland, especially considering the global crisis. The problem becomes visible after we consider specific categories of investors. The construction output decline was moderate thanks to fairly good results noted in the private sector, where the number of newly started units decreased only by less than 7% and where nearly 90,000 dwellings, predominantly single-family houses, were started. However, we ought to bear in mind that in this sector the announcement of construction start does not necessarily translate into any building activity: if money is short and a bank loan is not available, construction may be suspended for a certain period of time. It is in the developers? sector that the real slowdown is visible: the decrease reached almost 34% and less than 45,000 residential units were started. However, it is still a much better result than what could be expected after H1 2009.
But did the developers actually commence the construction of this number of units? REAS conducts regular monitoring studies of residential markets in largest Polish cities. According to the information gathered by REAS, only ca. 17,400 residential units were launched for sale in Warsaw, Krakow, Wrocław, the Tri-City, Poznań and Łódź. These six markets comprise approximately 50-60% of all dwellings for sale constructed in Poland. Even if some of the actually commenced projects have not been introduced to the market yet, it is most likely that the construction of a significant portion of investments marked in the statistics as ?started? in reality has not been launched. Consequently we are authorized to assume that the reduction of the construction scale in the year 2009 as compared to the year 2008 can reach even up to 50% in the developers? sector.
Developers? caution ? or problems with securing financing ? is evident in the ratio of residential units under building permits and units whose construction actually started: there are close to 20,000 units under unused building permits issued only in 2009. If we add to this number over 30,000 units under unused permits issued in 2008, we may estimate that developers are sitting on projects with valid building permits for at least 50,000 dwellings. If market condition and financial circumstances are favorable, the supply in the form of constructions started and launched for sale may increase rapidly. Yet will this be the case? The answer to this question requires knowledge of more than just residential market: it will depend above all the Polish economy, the budgetary deficit, the banking sector and the public mood.
Kazimierz Kirejczyk
REAS President
