Prices, Supply and Demand on the Rise

The boom on the real estate market is continuing. New offices, residential buildings and housing developments are being built, accompanied by a steady increase in prices owing to a continuing shortage of new and modern space.

The fast-expanding market is attracting foreign investors. Warsaw, Wrocław, Cracow, Gdańsk and Sopot are becoming large construction sites as developers race to win a piece of the action. No one knows just how long the investment boom will last but estimates point to several years. The market for commercial property and land is attracting the greatest interest from investors.

Offices and shops still in demand
Interest from investment funds has contributed to a fast increase in the price of commercial properties. According to a WGN Real Estate report, the presence of funds from Austria, Germany, the United Kingdom, Spain, the United States, Luxembourg and Israel is particularly strong in Poland. Commercial properties also enjoy the confidence of Arka BZ WBK and Sektor Nieruchomości BPH.

The entrance of investment funds onto this market has also resulted in greater supply. Around 1 million square meters of office space will be built in Warsaw in the next three years. Demand for modern offices is growing steadily. The percentage of vacant space declined over a year from 10 percent to 8 percent. At the same time, office rental prices went up. In the center of Warsaw, 1 sq m of office space costs around 20 euros per month.

Market analysts point to the fast development of Wrocław as a city of modern offices with rental at half the price of Warsaw. Next year the city's office space will double to 180,000 sq m. Modern office space is also on the increase in other Polish cities.

Residential prices soar
Housing prices are climbing at an alarming rate, causing concern to people planning to buy a home. Developers and real estate agents, on the other hand, are rubbing their hands with delight. Mortgages are quite easily accessible, although borrowing costs are quite expensive compared to other EU countries. Demand is high and supply is also on the rise. This year, the price of housing in large cities has already risen by 25 percent on average.

Apartments in relatively new buildings and up to 75 sq m enjoy the greatest popularity on the market. The rising prices (in Warsaw, 1 sq m of residential space costs on average zl.6,000) have prompted decisions to buy. Real estate agents are busy signing sales contracts, properties stay on the market for no longer than a few days and developers are selling apartments in buildings that they have not even started to build.

Slightly older apartments continue to be in demand mainly because of their lower prices. Homes in buildings constructed of prefabricated concrete are not what people dream of but remain the only affordable option for many families. Interest in large, several-bedroom apartments in apartment blocks is the lowest as they are quite expensive and not very comfortable. Moreover, smaller apartments in a good location and of a higher standard fetch the same prices and are preferred by prospective buyers. However, these large apartments are quite often rented to groups of students who do not care about their standard.

Luxury apartments are very popular. They sell well not only in Warsaw but also in Cracow, Wrocław and Gdańsk and in both old and new buildings depending on the personal preferences of the buyers. However, the buying trend is quite strong and prices continue to climb. Several years ago, zl.16,000 per square meter in a luxury apartment in downtown Warsaw was really shocking. Now, no one is surprised by zl.20,000 or zl.30,000 per square meter in the best districts of Warsaw. Around zl.35,000 per square meter in an apartment on Krakowskie Przedmieście Street was recently reported as a record, but Cracow's Old Town has turned out to be even more expensive-a buyer there paid zl.40,000 per square meter.

There is a group of clients who are looking for something out of the ordinary. Developers have finally noticed this niche. The best example are lofts, spacious apartments built in former industrial workshops or warehouses with exposed brick walls, fragments of original fittings or structural pillars.

A total of 410 of such apartments will soon be completed in Łódź, in a building of one of Karol Scheibler's spinning mills. According to Australian investor Opal Property Developments, the first residents will move in at the end of 2008. The apartments will have 70-90 sq m although a few of them will be even larger-130 and 200 sq m. The rest of the former factory will be converted into a shopping complex.

Such apartments are popular with people with freelance occupations, especially artists. Prices are attractive ranging from zl.3,500 to zl.7,000 per square meter, however, one has to remember that this price is for the bare walls. Buyers will have to spend just as much giving the interiors their desired look.

Houses less sought after
It is easier to buy a house than sell one. Houses have not been affected by the price boom. It takes several months to sell a house whether in or outside a city. Prices are not excessive but still quite high. What discourages people from buying a house is mostly the cost of maintenance-heating, repairs and the need to build a new fence for example. Small one-story or two-story houses built in the last few years, with the use of modern materials, are in greatest demand. There are two trends visible in these transactions-selling an apartment in the city center and moving to the suburbs or selling a house to buy an apartment. Prices vary depending on location, standard and plot size. A small pleasant house may be purchased for zl.200,000-250,000, while a suburban residence with a swimming pool may fetch several million.

Buy land
The investment boom has also affected the price of land. New price records are being set and plots are easy to buy and sell. Many purchases are typically speculative with profits going in some cases into millions of zlotys over several months. The larger the city, the faster the growth in the market for commercial plots. In locations where construction activity is higher, plots are more expensive and change hands more often. It is difficult to say which plots represent the best investment. One thing is certain-the closer to the city center, the better. This year prices are going up fast with the most attractive plots recording a five-fold increase in prices.

European funds and investors, who are buying up plots in city centers almost wholesale, have joined the competition for profits from commercial sites. According to the WGN Real Estate report, an investor purchased five plots in downtown Wrocław, winning the last tender with a price of zl.4,435 per square meter.

Developers who build residential buildings are slightly more choosy. They are looking for land that is not necessarily located in the city center but complete with utilities and with the right to develop. Prices of residential plots have increased more than twofold this year to zl.150-500 per square meter. Plots for detached houses are much more expensive, which is mainly a result of their more favorable locations and smaller sizes. The plot's neighborhood, situation and local development plans are decisive factors in determining the price. On average, the prices of these plots range from zl.90 to zl.700 per square meter.

In principle, every investment made now in real estate will return a profit or will mean major savings in the future. Prices are growing and will continue to rise. At present the average price for an apartment in Warsaw is zl.6,000 per square meter. In a few weeks it will probably be higher. When asked about the upper price limit, real estate agents only shrug their shoulders. One thing is certain-they will not be surprised if the average apartment price reaches zl.10,000 per square meter by the end of the year. This means more work and more money for them. As long as buyers are ready to pay, prices will continue to climb.
Source: By Konrad Bagiński, warsawvoice.p