According to various estimations, from 130 to 180 thousand new flats will be built in Poland this year – this being the most optimistic forecast for the residential market in the last 15 years! It ought to be emphasised that the current boom began in 2004 together with economic recovery and explosion of economical residential credits which were finally available to an average Pole who did not have fear about the future anymore. Still, it was obviously because of the above that within 3 years the price per one square metre grew by more than two times and achieved levels which were unaffordable to many people.

Data published by the Polish Central Statistical Office (GUS) indicate that construction of over 680 thousand flats was in progress in October 2007 (increase by 8.2 percent as compared with the preceding year), and construction of over 140 thousand flats began during the first three quarters of 2007 (39 percent more than one year before). By the end of November 2007, the number of flats which could be occupied exceeded 115.5 thousand.

Because of high supply, analysts expect long-awaited stabilisation of flat prices in 2008, especially in largest cities. They estimate a price reduction – minor yet unprecedented in the last years. However, this is more likely to take place in the form of discounts granted to buyers than reduction of prices per square metre. Buyers will be tempted with VAT exemptions (VAT to be paid by the developer), parking spaces or balconies included in flat prices. Experts agree that price decreases – if any – will be most noticeable in the popular segment, which will translate into reduction in average market prices, but not necessarily into lower prices of downtown high standard flats.

Moreover, supply in the secondary market is also expected to grow, which may involve price decreases in this segment. Real estate agencies are offering more and more cheap flats in less attractive locations – remote suburbs with poor transport infrastructure or flats in old blocks built from prefabricated concrete panels and located at large high-rise residential estates.

Small developers that appeared in large numbers on the wave of residential boom and easily became successful also fear about their future because of expected increase in supply and, consequently, of competition. As the brightness of eldorado has somewhat dimmed, however, small and relatively inexperienced companies may not succeed in the struggle for customers with industry sharks. The latter will certainly prove to be more resistant to changeable market conditions, increased costs of investments (prices of construction materials and costs of labour). Are we going to witness a wave of spectacular bankruptcies? Experts claim we may see companies collapse; this, on the one hand, will clear amateurs from the market but, on the other hand, it will spoil the image of the whole industry and plunge many people financially – both entrepreneurs and customers.

Still, the latter ought to be happy. Growing interest rates limit the Poles’ credit capacity, but increasing salaries and stable labour market often compensate for the above. Growing purchasing power and astronomical prices of comfortable flats result in increasing interest in plots of land for construction purposes – reflected in their growing value. In 2007 prices of cheapest plots of land in Warsaw increased six times, and prices of the most expensive ones – nearly three times. Although analysis argue that land has also achieved maximum price levels, construction of one’s own house will still be an interesting alternative for those who dream of their own homes.

Despite the occurrence of many new risks which must be faced by investors, buyers and analysts, boom in the residential market continues. Shortage of flats in Poland is still estimated at ca. 1.5 million units, which constitutes a significant challenge and – considering current good economic situation – will keep developers busy for many years to come.