Poland among European leaders in terms of the number of new flats delivered in 2020

Deloitte report summarises the status of the residential estate market in 23 European countries and in Israel in 2020. Experts point out that the economic slowdown caused by the pandemic did not affect the residential market in the same manner as the financial crisis of 2007-2009. Despite economic uncertainty prices of flats increased in all analysed countries.

After an initial slowdown of the recently commenced construction projects and despite high market uncertainty, the Polish residential market has rebounced fast and the growth trend resumed. In 2020 the number of flats brought into use in Poland was record high; it exceeded 220,000 and reached a 6.7 percent increase year on year. At the same time Polish residential market has continued a rapid growth, unlike in other European countries. The ratio of the existing flats to 1,000 inhabitants is 393, vs. the European average of 463,

- says Dominik Stojek, partner associate, Deloitte Real Estate Advisory.

Ranked by the number of new flats brought into use in 2020, Poland comes third, after France (381,000) and Germany (306,000). Bosnia and Herzegovina close the stake with the number of 2,400. At the same time, the ratio of new flats per 1,000 inhabitants is the highest and reaches 5.79. Further, Poland is among the countries with the highest ratio of flats the construction of which commenced in 2020 per 1,000 inhabitants (5.85). In this ranking, Austria comes first with the ratio of 10.85, followed by Romania with 7.52. Developers keep warning, though, that the trend may not last too long. Limited access to construction plots and long administrative procedures may reduce demand in future.

Prices stay high

In Austria, the price per square meter of residential space is the highest (EUR 4,457). France comes second (EUR 4,421 per sqm), followed by Germany (EUR 4,100 per sqm). Bulgaria has the lowest prices (EUR 587 per sqm), followed by Bosnia and Herzegovina (EUR 881 per sqm).

Paris remains the most expensive place as far as the residential space is concerned: in 2020, its primary market’s average prices exceeded EUR 12,900 per square meter. Tel Aviv is another city where the prices of residential space exceed EUR 10,000 per square metre.

In 2020, prices of residential space increased practically in all European capital cities. Rome was the only exception with square metre prices dropping by 3.11 percent vs. 2019. In Poland, the average price per square metre of residential space is EUR 1,581. Warsaw is the most expensive with EUR 2,233 per sqm, followed closely by Gdańsk (EUR 2,019),

- says Maciej Krasoń, Real Estate and Construction Sector Leader, Deloitte CE.

In Warsaw and in key regional cities, on average, the transaction prices on the primary market increased by 7.5 percent year-on-year, and on the secondary market, by 11.2 percent.

Lisbon, with the average price per square metre 3.5 times higher than the national average, came first in terms of the denoted difference. In Warsaw this ratio reached 1.4.

Wait ten years to own a flat

Deloitte analysed how long Europeans must work to buy a flat. In this respect, Serbia is the least friendly country, taking the lead the first time ever in history, with the average of 15.2 gross annual salaries needed to buy 70 sqm of residential space. Poles need 7.6 annual salaries for this purpose, which places us in the middle of the stake. Ireland has the most advantageous ratio: just 3.1 annual salaries are enough to buy a flat there.

The mortgage loan to GDP ratio is also important. Access to loans depends directly on residential space prices.

Debt level across Europe varies considerably, which can be explained with the share of residential loans, maturity of the mortgage market and historical changes on the residential market. Countries with the lowest debt level (under 20 percent) include Romania, Hungary, Bosnia and Herzegovina. In Poland this ratio reaches 35.3 percent. In Norway, Denmark and The Netherlands the debt level has exceeded 150 percent,

- says Maciej Krasoń.

Interest on housing loans is the lowest in Portugal (approx. 1%), in Poland reaching 2.5% and the highest, 5.3%, in Romania.

Pandemic seen through the rental lenses

The pandemic has adversely affected flat rent prices. After years of stable increase, average prices dropped considerably in all analysed Polish cities due to reduced demand and growing competition among owners. Expressed in EUR, the drops ranged from six percent in Warsaw to 17 percent in Kraków. Even following the decrease, rental prices in Warsaw with the monthly average of EUR 15.1 per square metre were the highest among Central European cities, compared to EUR 11.5 in Prague and EUR 10.7 in Bratislava.

Paris remains the most expensive city in terms of rent, with the average monthly rate of EUR 28.6 per square metre of residential space. At the same time, rent rates plummeted in places previously experiencing high tourist traffic, such as Barcelona, Budapest, Madrid, Prague and Amsterdam as a result of growth in the number of flats offered on the market, formerly rented on a short-term basis.

The number of Europeans who decide to invest in flats has increased. Despite instability on the rental market and continuously growing prices, purchasing a flat is an attractive alternative to bank deposits bearing zero or even negative interest rates and devaluation of savings in the face of inflation. Many countries signal unprecedented demand for new flats. In Poland a similar trend is expressed both in the form of withdrawing bank deposits and record high interest in mortgage loans. The trend will continue throughout 2021, and result in further price increases,

- adds Dominik Stojek.