Will housing prices fall in 2023?
In 2022, housing prices rose by up to 32% in Bialystok on the primary market.
However, the public debt we have (1.17 trillion zlotys), the situation in Ukraine, the pandemic – all this has an impact on inflation. And in addition, the prices of building materials have also risen.
But with inflation at such a high rate, which is 17.2% at this point (6/10/2022), and with lending falling as much as 80%, do housing prices have a chance to stay the same?
Why will prices fall?
Transaction prices are already 5% lower in the secondary market. We can’t see this yet in statistics, but we can already see it in the transactions that are being carried out on the market today.
If the economic situation and the political situation related, for example, to the war in Ukraine does not change dramatically (if the war does not escalate very sharply) then we will probably keep prices lower by 5% to 10%, which is actually already a lot.
But if we additionally take into account inflation, which we have at the level of (17.2%) and housing prices are the same or lower by 5%, then in real terms, taking inflation into account, these prices fall about 20% – which is already visible.
In addition, the market will be constantly affected by factors that will inhibit market demand, such as rising interest rates. This is a factor that affects the real estate market in a very strong way.
In the primary market, we are also seeing a muted and large drop in demand.
The group of people who are interested in mortgages, or have the ability to take out a loan at all, has decreased significantly.
Factors that may inhibit the decline in market prices:
Reduction by developers of investments.
In the third quarter of 2022, developers, relative to the previous year, are reducing the investments they have started by about 30%. And consequently, they are limiting the supply of new apartments on the market. If there is little supply, these prices won’t have room to fall either. Developers do not want to sell at lower prices (the reason is also the increase in prices for construction materials) and prefer to wait until the market situation stabilizes. To sell at a similar price than to sell cheaper.
Cash customers
Cash customers at the moment account for about 60%-70%. So this is a large group that wants to invest in housing or buys property for their own housing needs.
We have come to a point where the real estate market is uncertain, what will happen is just a matter of guessing and using the knowledge we have at this point. However, there are many factors that may or may not change that will change the market so dramatically.
At this point, we already have a market where the buyer customer begins to dictate terms. That is, the change from a seller’s market, to a buyer’s market. We, as property owners at this point, need to be more flexible to customer demands. We are just entering this new stage.
Many people have suggested that there is currently a , “bubble” in the real estate market, but we are far from such terms. Why?
In order for there to be a bubble in the market, we must have two key ingredients that affect it. among them, a very dynamic (monthly) price increase and increasing sales. Of course, these prices have been rising, but not so dynamically.
Also, on the one hand, we have high inflation, a significant drop in borrowing, large drops in sales at developers – and on the other hand, there are still cash customers, investors and a larger population in Poland who need apartments for rent – which are simply no longer available.