The BEST Guide to POLAND
Unanswered  |  Archives 
 
 
User: Guest

Home / Real Estate  % width posts: 15

Supply vs Demand - How long can contractors continue to push? Krakow


Norwegian 5 | 56
18 Feb 2013  #1
I dont have exact numbers, only from own observations, but when I look at freshly finneshed projects, and projects that has been on the markets for like 1-3 years and ofcurse those serial projects I just dont get it. Some has been out in the market for 2-3 years and still over 50% of the units are still not sold. Prices are maybe reduced with 10-15% from the starting price, but the units continue to be empty!

One, out of many, projects like this is the garden recidence. Ok location, 450 unites, finnished in summer 2010 (aprox) and still nearly 250 units are still not sold.

I just dont get it.
A) This entrepenuer should be bankrupt (seems not to be) and
B) Should nt other projects start to take it easy?

They are continue to build apartments all over the city in the same pace, like nothing has happend. The city maybe need this amount of appartments in 5-7 years, but right now the supply of new apartments in the pricesegement between 7.000 to 11.000 pln per m2 is maybe 20-25% higher then the demand.

Still the numbers of ready units continue in the same pace.

I then ask 2 questions:
1) Is the margins in this business to good, so a entrepenur go break even when they sell more then 60-65% of the unites.
2) Should it be regulations on the wages for the unskilled contructorworkers so the cost of building get a upward pressure.

+ one more.

Are we facing a wave of bankrupcy in the contruction sector, specially from the smal companies that atm are living on there clients escrow accounts!

I am from a "market" that stuff like this would be impossible. To spend 4 years to finnish a project, and to have 50% unsold after 1-3 years are for me "not possible".

In Poland, and Krakow it seems like this is business as usual, and oi, here we build one more with starting price of 8.000pln per m2!

Feel free to enlighten me!
Wroclaw 44 | 5,389
18 Feb 2013  #2
Some has been out in the market for 2-3 years and still over 50% of the units are still not sold. Prices are maybe reduced with 10-15% from the starting price, but the units continue to be empty!

it's the same here in wroclaw.
thetenminuteman 1 | 80
18 Feb 2013  #3
There's still an undersupply of apartments in Poland, so they will sell at some point. The banks may also be willing to be flexible on credit terms as they won't want the hassle of selling themselves.
poland_
18 Feb 2013  #4
In Poland, and Krakow it seems like this is business as usual, and oi, here we build one more with starting price of 8.000pln per m2!

Leverage-leverage-leverage.

If they dropped their prices to 5,000 PLZ per m2 they would go bankrupt.
thetenminuteman 1 | 80
18 Feb 2013  #5
Would there really be any reason to do so right now?
OP Norwegian 5 | 56
19 Feb 2013  #6
To have over 50% unsold units, and not reduce the prices, sounds to me like the sure thing of going to h¤%&

With the capitalcost that I guess these developer have (6 to 10%) to have 1 unsold unit, of let say, 500.000pln they drop between 30.000 and 50.000 in rentalcost on a yearly basis. Keep in mind that a lost oppurtinty to make money, has the same value of actually have to pay money!

I havent been all over the world, but in those areas I have been involved the last 15-20 years something I have never seen anything like this. Ofcourse you have irland and Spain atm due to the financial crises that hit them after a massive boom in the consruction sector (market out of ballance), but Poland is not supposed to be hit by this crises, but the market stil seems to, voluntarly from the supply side, to be out of balance.

There's still an undersupply of apartments in Poland, so they will sell at some point. The banks may also be willing to be flexible on credit terms as they won't want the hassle of selling themselves.

If this is correct. Then they should just come to Krakow. Maybe 5.000 - 10.000 apartments, ready to move in, fresh from the market, UNSOLD!
milky 13 | 1,657
20 Feb 2013  #7
The demand is there and the supply is there. It's about remittance, which created the bubble.
GabiDaHun 2 | 152
20 Feb 2013  #8
The problem is they demand too high a price.

Hanging in there and waiting for the "good old days" to come back.
milky 13 | 1,657
20 Feb 2013  #9
The problem is they demand too high a price.

I would imagine that prices will fall more in 2013 than 2012 due to the ending of the home owners grants.

Hanging in there and waiting for the "good old days" to come back.

maybe 2006 prices but pre-boom is unlikely, unless the 3 million Poles abroad are sent home.
thetenminuteman 1 | 80
20 Feb 2013  #10
I would imagine that prices will fall more in 2013 than 2012 due to the ending of the home owners grants.

Not necessarily, as Rodzina na Swoim came with many conditions and wasn't particularly favourable towards new builds anyway.
milky 13 | 1,657
20 Feb 2013  #11
up to 80 % of purchases availed of it in Warsaw etc in 2007-08. That's a lot in my book.
peterweg 36 | 2,316
20 Feb 2013  #12
That's a lot in my book.

Its Krakow it was a tiny amount, 5%

Maybe 5.000 - 10.000 apartments, ready to move in, fresh from the market, UNSOLD!

The figure is not like that. More like 2200.

Both of you should read the REAS report, Milky you know about it already.

media.reas.pl/en/pr/232656/residential-market-in-poland-in-q4-2012?changeLocale=EN
milky 13 | 1,657
20 Feb 2013  #13
Its Krakow it was a tiny amount, 5%

which year? 2004-08?
thetenminuteman 1 | 80
20 Feb 2013  #14
Its Krakow it was a tiny amount, 5%

Which confirms my point.

Rodzina na Swoim was actually not that good at all, particularly as it usually came with higher deposit requirements and higher interest rates once the promotion ended.
OP Norwegian 5 | 56
25 Feb 2013  #15
Thanks for this paper.

The figure is not like that. More like 2200. Both of you should read the REAS report, Milky you know about it already.

According to this rapport the market is clearly more in balance then how it feels and look like for me. So this is a very good read.

What I am affraid of is 1) Not correct numbers and, 2) a big difference (in prosent) between sentrum and pereferi. (In the fact that sentrum is ofcourse the intresting area for everyong that invest in this market and that the relativ % is much worse here compared to the average numbers.)

The raport also state a upsvinge in prices both in Warsaw and Wroclaw. Intresting to see if this continue and affect the other cities. Upsvinge in GDP, lower intrestrate is good news,

While a climbing unemployment rate may ease the demand pressure in the bottom market.


Home / Real Estate / Supply vs Demand - How long can contractors continue to push? Krakow
BoldItalic [quote]
 
To post as Guest, enter a temporary username or login and post as a member.