Home prices will go down. Here’s why

According to experts from PKO, the reasons for the downward trend in the housing market are:

• the collapse of credit demand for housing as a result of high interest rates and restrictive prudential regulations;
• real decline in the income of the population; An increase in the supply of apartments in the context of a large number of projects launched during the boom and completed in the first half of 2023;
• a slower increase in construction costs;
• Increased rates of return expected by investment buyers.

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On the other hand, in their opinion, the decline in housing prices will be slowed down, among other things, by:

• high rental rates with a limited short-term supply of apartments for rent;
• Increasing housing affordability by improving the ratio of income to housing prices;
• slow recovery of lending;
• Presentation of apartments from the period of already high construction costs into supply;
• The gradual emergence of demand among refugees from Ukraine.

The negative pressure on the price level is expected to subside in the second half of 2023.When the market is more and more affected by the limited supply (currently, the number of constructions and the number of permits issued have begun to decrease dramatically), and at the same time, demand will slowly recover.

Analysis of the PKO process reminded that on March 14, 2023, the Cabinet of Ministers adopted a bill on state assistance in saving for housing purposes (the so-called “first apartment” program). The project provides for support from the state budget for loan installments for the first apartment. The total cost of the ten-year program is estimated at PLN 16 billion. The project assumes that the program will be launched on July 1, 2023.

According to PKO BP Until the regulations come into effect, this will dampen the demand for credit, because potential borrowers will refrain from making decisions, which, along with an increase in the supply of apartments, increases downward pressure on prices. After the launch of the program, interest in it may lead to an increase in demand as supply decreases (since the first quarter of 2022, fewer apartments have started), which will revive upward trends in apartment prices.