Article: Budimex calls for stagnation in 2008 residential property market

Article in today's Warsaw Voice. (free subscription required to view)
warsawvoice.pl/newsX.php/5654

Summary - Budimex, one of largest developers in Poland is predicting a stagnant housing market through 2008, with the possibility of less flats sold industry-wide than in 2007.

They may suspend some developments planned for 2008. They foresee the stagnation as a problem for small developers who have been over-aggressive in purchasing land.

Thoughts anyone?

So, one of the largest developers is suspending some developments because they see stagnation as a problem for the small developers?...I suppose this make sense to somebody?

isn't Budimex the main contractor for the new Warsaw airport terminal debacle ?

it comes down to banks becoming very cautious who they lend money to. if you were a bank would you lend money to a small developer that does not have a long history of delivering on projects? probably not.

Budimex do not want to get caught with a huge landbank and many half completed projects if the world economy looks like it could be experiencing a cool down.

i am sure that i will upset lots of naive people who believe that Poland is a special place where the laws of economics do not apply

I think I wasn't clear enough in my summary of the article. (I'd post the whole thing, but it's against the forum rulles): Budimex expects a stagnant period of 1-2 years on the residential market. They believe they are well prepared to weather this period, but may decide to hold back on some new projects. However, they expect that this downturn will have a more serious impact on smaller developers: " "The year 2008 could be difficult for some developers, especially smaller ones which were aggressive in buying grounds." "

So if Budimex is correct, that there will be an over-supply of new build apartments in 2008 - 2009, what will this mean for the many investors on this forum who have recently purchased or put down deposts on flats to be completed in the next 24 months?

Will they see some projects that they have already placed deposits on come to a halt? Will they have trouble getting those deposits back in a reasonable time frame

When these projects complete will the flats be worth less than what they paid for them?

There may well be an over-supply in the larger cities but this has been known for a long time. It takes 3-4 years to buy land, plan the infastructure in liason with the city councils for large projects, 1-2000 apartments. Nobody applied before Poland entered the EU and the 4th year is just coming up in May. The large developers have their planning agreed and permits in place at just the wrong time, a worldwide recession and a credit crunch (which by the way does not effect Poland very much as credit is fairly new here).

If these large developers "sit" on the land and wait for world finances to ease, its quite expensive for them.
The Spanish and Irish are getting hit harder as the exchange rate against the Zloty has dropped considerably in the past year so any developing they do has to hit top price to cover the currency fluctuations.

Smaller town developers should not be affected to much as labour will be more available and building prices will drop.

according to those loveable statisticians at GUS there is an increase in apartment construction of 36.8 in 2007 over the same period a year earlier. so the market is getting warm

in every economy there are only so many people who are eligible for loans and have sufficiently high salaries to make repayments. without a constant stream of fresh blood/ new victims any property boom will run out of steam eventually and the prices will come down.

I believe that Budimex are indeed able to weather the storm but if they were not, they would be unlikely to mention that fact. as for small developers some of them go bust. it is a sad fact of life. several will go bankrupt this year for sure

the Polish real estate market is a lot healthier than the UK or Irish real estate market that is for sure.

if you have bought your own flat and can afford to make the repayments - who cares?
flats are places to live, where children grow up and where families make their homes rather than investment products to make money

I wonder if that will be the case. I live 30 kilometers outside of Kraków. The local market for flats is now just finally taking off as so many people have been priced out of Kraków. If Kraków were to become more affordable over the next 12 months it could be bad news for the small local developers.

It will be interesting to see how this all goes down. The economic news out of the US gets worse by the day, and now it seems that there is very little support for the Asian decoupling theory. What's bad for the US will be bad for Poland.

Fundamentally I think the housing market in Poland is sound; domestically driven, still a shortage of housing, credit is not (nor was ever) easy to come by, a booming economy, remittances from abroad, pro-business government, dramatic wage inflation in the private sector, strong currency.

However, I am a bit skeptical of all of these off-plan projects due to complete in the next 24 months across all of the major cities. If the "foreign" investors decide en masse to take their chips off the table at the same time it could be very interesting. Just look at Miami.