Will there be a decrease in apartment prices in Poland in 2023?

Dynamics of the real estate market in Poland in 2022

In 2022, the real estate market in Poland showed extremely active growth rates, standing out against the backdrop of global changes. However, by the end of the year, it faced serious challenges due to a sharp increase in inflation, rising mortgage interest rates, and a general increase in housing prices. These factors became the basis for the slowdown in the growth of the real estate market.

Prospects for housing prices

This raises the question, will this situation lead to a decrease in housing prices? What are the expectations for the Polish economy in 2023?

Economic activity forecasts

According to data from the European Union, after impressive growth in gross domestic product (GDP) in 2022, economic activity in Poland is projected to slow down in 2023. The main reasons for this slowdown include:

• Increase in economic uncertainty
• Tightening of conditions for obtaining loans
• The need to adapt the economy to the new level of commodity prices

Inflationary processes will continue to exert pressure, as rising production costs will contribute to price increases for end consumers.

Public expenditure and deficit

Moreover, the country's spending on security and measures to overcome the energy crisis will create additional pressure on the state budget, which may already be facing difficulties. In 2023-2024, a slowdown in economic growth is expected, possibly even with negative dynamics at the beginning of 2023. Consumer confidence is low, which, combined with high inflation and rising credit costs, will negatively impact private investments, especially in the construction sector.

Positive aspects

Nevertheless, the increase in defense spending and investments in local authorities may help partially offset the decline in private investments, which will ensure a positive trend in overall capital investments in 2023. Despite inflation, the high level of consumption by individuals will remain against the backdrop of:

• Significant government support
• Low unemployment rate
• Inflow of migrants from neighboring countries

Foreign trade activity

Regarding foreign trade activities, Poland is expected to demonstrate a positive trade balance due to an increase in export volumes, while imports will grow only slightly. As a result, real GDP growth is likely to decrease to 0.7% in 2023, followed by an increase to 2.6% in 2024.

Financial forecasts and assistance

In addition, unexpected increases in expenditures not included in the original budget, combined with possible income tax cuts, could well increase the overall government deficit to 4.8% of GDP in 2022. In response to the sharp rise in energy prices, the government is preparing a series of measures to reduce them, including:

• Reduction of the VAT rate
• Financial subsidies for heating for households
• Long-term support program for energy-intensive industries with total financing reaching 2.1% of GDP

Introduction

In a situation where the financial system of the state is influenced by numerous factors, one of the most significant remains the cost of supporting displaced persons from Ukraine. This support includes payments for housing conditions, various social benefits, as well as funding for education and healthcare. In response to the constantly rising energy prices, the government has developed a set of additional measures to support citizens, which will be implemented in the next financial cycle.

Tariffs and support measures

In particular, electricity tariffs will remain at the current level set for households within certain consumption limits, while restrictions will be introduced for small and medium-sized businesses. Additionally, a program for purchasing coal at a predetermined price is planned, which should help control expenses. Support for people who have left Ukraine continues, confirming the government's persistent desire to provide the necessary assistance.

Investments in defense

Moreover, the government has begun implementing an extensive investment program in the defense sector, which will increase budget expenditures in this area to 3% of the gross domestic product (GDP) annually. Such measures will undoubtedly lead to an increase in the budget deficit, which is projected to reach 5.5% of GDP by 2023.

Problems in the labor market

Another important point is the observed changes in the labor market. Real incomes of citizens are declining against the backdrop of record inflation levels. In Poland, in 2022, the inflation rate measured by the Harmonized Index of Consumer Prices (HICP) reached an unprecedented level, and unfortunately, it is expected that this record may be surpassed. The main factors contributing to this rise in inflation include:

• Rising raw material prices
• Increase in production costs
• High consumer demands

This allowed companies to pass their costs onto consumers.

The situation with the salary

The increase in salaries observed in 2022, along with the rising energy prices and active government support, will contribute to maintaining high inflation in the coming quarters. However, considering the decrease in economic activity and reduced demand due to high interest rates, it is expected that inflationary pressure will decrease by the end of the forecast period.

After peaking at close to 19% in early 2023, inflation is expected to fall to 4.3% by the end of 2024, according to preliminary data.

Risks and forecasts

Nevertheless, it is important to consider that this forecast is accompanied by a number of negative risks. The persistence of inflation, especially in the context of a tight labor market in Poland, could put significant pressure on real incomes.

Forecasts for the energy sector

The energy sector is expected to experience high inflation in the coming years despite the measures introduced by the government to freeze electricity prices. This is due to the rising price of natural gas, especially at the beginning of 2023.

If the current policy remains in place, a gradual easing of a number of measures aimed at supporting prices will become a reality. Key changes are expected to include:

• Reduction of the VAT ratestarting from January 2023;
• Expected increase in prices for energy resources.

The situation in the real estate market in Poland

As for the real estate market situation in Poland in 2023, the sector appears less attractive than it might seem at first glance. Realtor and real estate expert Galina Kharlamova notes that in 2022, mortgage interest rates increased significantly, and now the minimum rate for purchasing housing in Poland is8% p.a..

This high rate significantly complicates the task for potential buyers. As a result of these factors, it is noted:

• Decrease in demand for housing;
• Weak growth in supply in the market.

Customer benefits

For those ready to make an immediate real estate purchase, the current situation could be advantageous. Right now, developers can offer significant discounts on new apartments or provide attractive installment plans under the "20-80" scheme.

The essence of this scheme is that the buyer:

• Contributes20%from the cost of the apartment immediately;
• The others80%Payments are made upon completion of construction.

In addition, many offers on the market includea parking space as a giftwhich is an additional advantage for buyers.

Secondary market prospects

In the secondary market, there is also the possibility of negotiating with sellers, even though housing prices remain stable. In the current situation, it is crucial to find an experienced realtor who can ensure optimal deal conditions, as many apartment owners are willing to make price concessions.

External interest in the Polish housing market

Meanwhile, there is an increase in external interest in the Polish real estate market. The number of buyers from Belarus and Ukraine has increased significantly, as they do not need to resort to mortgage lending - they have their own funds.

Many of those who sold their movable and immovable property in their home country and moved to Poland for permanent residence choose townhouses in the suburbs of Warsaw. For these buyers, it is crucial to obtain more living space without resorting to complicated permits from the Ministry.

Investment opportunities

Investors interested in purchasing real estate in Poland are also paying attention to one- and two-bedroom apartments in areas located close to the center (for example, Mokotów, Żoliborz, Wola). These areas are in demand due to their rental convenience.

Thus, although the real estate market is facing certain challenges, there are also opportunities for those who are ready to take proactive steps.

Conclusion

In conclusion, after analyzing the real estate market situation in Poland in 2022 and the forecasts for 2023, several key conclusions can be drawn. Undoubtedly, 2022 was a period of active changes, during which the real estate market attracted the attention of both local and foreign investors. However, factors such as high inflation, rising mortgage interest rates, and the overall trend of increasing prices led to a significant slowdown in growth rates and stagnation in the market by the end of the year.

The economic situation in 2023

The impact of the country's economic situation, which is projected to be challenging in 2023, cannot be overlooked. The main factors affecting the economy:

• High uncertainty
• Tighter financing conditions
• Increase in commodity costs

Nevertheless, despite all the aforementioned issues, there are also positive aspects. An increase in government spending on defense and support for local authorities can offset the decline in private investments, which in turn will support overall growth.

Consumer activity

It should also be noted that consumer activity, despite the high level of inflation, will remain at a positive level thanks to support from the authorities and low unemployment. Forecasts for 2023 predict a slowdown in GDP growth; however, the overall economic picture remains complex, misleading its participants.

Inflation and real incomes

The impact of inflation on the real incomes of the population is also an important aspect. It is expected that the decline in real wages combined with rising energy prices will affect the living standards of citizens. Thus, in 2023 Poland will continue to be in an environment of economic instability, which will create challenges for all sectors, including the real estate market.

Final thoughts

In conclusion, the situation in the real estate market in Poland requires more careful analysis and readiness for unpredictable changes. Individual players and investors must take into account current economic trends and adapt their strategic decisions. I hope that in the coming years, Poland will be able to adjust its economy for stable growth and restore its position among the attractive real estate markets in Europe.