International advisory firm JLL has published a summary of conditions in the primary residential sectors of Poland's six largest markets (Warsaw, Kraków, Wrocław, the Tri-City, Poznań and Łódź) at the end of Q4 2021, which indicates that:

• 2021 saw housing sales reach 69,000 – only 2017, considered the peak of the boom in this market cycle, had a better performance.

• The difference between the units sold and those introduced to the developers' offer was 11,000 - the largest imbalance between supply and demand since 2013. At the end of December 2021, the offer was 22% lower than a year earlier.

• Rising costs of construction combined with a limited supply of new flats and unabated demand resulted in rapid price increases – by 14% to 18% y-o-y and even, as in the case of Łódź, by 21% y-o-y.  

• It is difficult to expect significant discounts, given the very high level of pre-sales in projects under construction and the limited supply of new units, with investment demand still high.

The challenge is not selling a property, it’s finding one to buy

"2021 was exceptional in many respects. The share in demand of buyers purchasing units for their own needs was probably at its lowest for many years. The residential market has gone from primarily being a place where one of the most important human needs is met – to have a home for oneself and one’s family – to almost being on a par in importance with other capital investments. We have not seen such an acute imbalance between rapidly growing, purchase-determined demand and supply which is struggling to keep up since 2007", Kazimierz Kirejczyk, chief residential market analyst and Head of Strategic Advisory Panel at JLL summed up the previous year.

2021 was a year of records for many of the markets in the top six. In Łódź, which in the last two years has narrowed the gap to the markets with the highest turnover, new supply in 2021 totalled 6,100 units with sales hitting the 6,200 mark. Similarly, Poznań registered its best ever annual sales performance with 7,400 units being sold despite a price increase of over 16% y-o-y.

Developers operating on these six markets have been able to flexibly increase their offer due to the fact that they have the largest “stock” of units with issued permits. In the Tri-City, the number of units sold amounted to 10,900 with the average price increasing by 15.1% y-o-y. This result was achieved thanks to the activity of developers in this market, who managed to introduce 9,200 residential units to the market, i.e. only slightly less than the average in previous years.

A record numbers of permits issued, but nothing on offer

In the six largest markets, a total of 37,400 units were on offer from developers at the end of 2021, down by over 22% y-o-y. A similarly low level was last recorded in 2010.

Meanwhile, according to the Statistics Poland (GUS), 2021 saw record numbers of units for which building permits were granted. So why are developers not utilizing them and launching new projects?

"They are introducing them, but not in the markets that have so far been regarded as the litmus test of the primary market, i.e. Poland's six largest cities. Our analyses show that smaller cities are now responsible for the sharp increase in developer activity. And we are not talking about cities from the  next ten largest markets in Poland, but those below 100,000 inhabitants. Back in 2017, 60% of all new units were being built in the six largest agglomerations. Today, this trend has been reversed with these smaller markets now responsible for around 70% of developer production in the country", comments Aleksandra Gawrońska, Head of Residential Research at JLL.

In Poland's largest market, Warsaw, where an average of 24,000-25,000 units were put on sale in 2018-1019, only 19,000 units were on offer in 2021. With sales of 23,000 in 2021, it means a reduction of 4,000 new units available for purchase. Compared to 2019, new annual supply was 11% lower in Warsaw, and compared to 2018 - by as much as 22%. As a result, the offer on the primary market at the end of December was an extremely low 10,000 units.

Therefore, it is not surprising that in the largest cities, where competition for units was high and opportunities to increase supply were limited, prices of units which appeared on the market increased from quarter to quarter.

There is no indication that housing prices are set to fall

Asking prices for residential units in 2021 outstripped the rate of inflation. JLL data shows that during the last quarter of the year, the largest increases in the average price of units launched for sale were in Warsaw (6%) and Łódź (5%), with the smallest being in Wrocław (1%). In other cities the quarterly increase was around 3%.

On an annual basis, the majority of the six markets saw double digit increases of between 14% and 18%, with the exception of Łódź which, apart from sales volume, started to close the price gap with the other five cities. At the end of December 2021, the average price for units on offer in Łódź was PLN 8,100/sqm, a 21% increase on the year before.

"There are many indications that the supply-demand gap on Poland's largest residential markets, which is largely responsible for the price increases, will continue to widen. A certain slowdown in demand can be expected in connection with rises in interest rates, and the weakening in the purchasing capacity of buyers that would follow – especially those buyers who took out a mortgage to purchase a property. Still, rising inflation will continue to underpin the shift of savings into the real estate market", explains Aleksandra Gawrońska, Head of Residential Research at JLL.

"Statistics from the residential market confirm that the development sector is entering 2022 in very good shape. Unfortunately, as has been the case in the past, the most important risks have nothing to do with either the potential of development companies or factors directly affecting demand, such as interest rates. It is these external factors, including those originating from outside Poland, which make it so difficult to formulate clear-cut forecasts", concludes Kazimierz Kirejczyk.