December 1, 2022

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The black scenario on real estate has become a reality.  'It's a real meltdown'

The black scenario on real estate has become a reality. ‘It’s a real meltdown’

The mortgage market has practically frozenHowever, the prices of apartments and houses are still high. Meanwhile, the sale deal is like medicine, yet the number of new offers is increasing. As it turns out, most of them are newly built apartments or houses.

The municipality of Lesznowola near Warsaw is one such place where recently many new properties of semi-detached houses and terraces have been built. Recently, more and more offers for the sale of newly built houses appeared on real estate fences. The starting prices are not low.

Example? One of the comfortably furnished houses is for sale for 1.4 million PLN, and, as the agent explains, the price is non-negotiable. When asked about the reason for selling, he only explained that the owner is selling it for random reasons. Interestingly, the same answer is given to other offers from the same residential property.

Expert: More and more families can not afford the increasing costs of loans

Real estate experts say there is a human drama behind this brief explanation. More and more people are forced to sell their properties due to the huge increase in loan installments.

Inflation is raging, and the cost of living is rising. No wonder more and more families are unable to bear the burdens related to the increasing costs of loans, as a result of which they often decide to sell an apartment or house – explains Thomas Błeszyński, an expert in the real estate market.

Sellers spend sleepless nights on another problem – related to the number of people willing to buy such a property. There are practically no new sales transactions in the market.

The real estate market collapsed, as evidenced by the statistics

It should be noted that in the summer of last year, when interest rates were relatively low, then Mortgages There were queues. However, as of October 2021, interest rates began to rise systematically. As a result, some loan installments have tripled. As if that weren’t enough, there’s also rapid inflation and higher energy bills.

Currently, people who have significantly increased their loan payments are more likely to sell real estate. It can be expected that more and more such offers will appear on the market. At the moment, the situation has been somewhat eased by the so-called credit leave, but it will not improve the situation in the long run – admits Barbara Bogaj, principal analyst of the real estate market at SonarHome.

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See also: “You can also lose out on real estate.” Will the developers learn a painful lesson?

The market forces sellers to lower prices

Barbara Bugaj also claims that in the current situation, there is increasing pressure on sellers to lower and negotiate prices, as a result. There is already a situation when the transaction price decreases relative to the bid price by up to 100 thousand. zloty.

Often times the market forces the sellers to lower the price. In some situations they are very perceptible. Particularly big discounts are for apartments, the initial price of which is often overestimated – he explains.

Example? Recently, SonarHome was involved in a deal in which the starting price came to 480K. zloty. We managed to convince the owner to lower the starting price to 399 thousand. PLN, then to 369 thousand. zloty. In the end, the building was sold for 355 thousand. zloty.

– However, sellers are still reluctant to reduce discounts, and they usually need at least a month to accept the fact that potential buyers can choose other apartments – says Aleksandar Kwasowski, director of digital broker at SonarHome.

So why are sellers still reluctant to cut prices? The ask price is often the same as the ask price. Sellers who post an ad compare their apartment with others, so they post an offer similar to the existing ads. Often sellers subjectively evaluate that their apartment looks better, so they increase the price – Barbara Bogaj explains.

Investors will earn more today on bonds and deposits

According to experts, the current situation will inevitably lead to a price correction. – We note that transaction prices are already decreasing slightly, but on average they are a few percent (up to 5 percent in the secondary market), compared to the second quarter of the beginning of the year – informs Pujaj.

Why are there so few buyers? So far, nearly half of the demand in the real estate market has come from cash investors. In their case, high interest rates also play a major role – explains Jaroslav Sadovsky, senior analyst at Expander.

The expert adds that buyers of real estate for cash usually consider renting it, so the purchase of such an apartment should be profitable for them. – Meanwhile, at the moment you can get about 7 percent. on treasury bonds or bank deposits. Thus, the profitability of the investment related to the purchase of an apartment, at current rental rates, is less than when we put money in a deposit or treasury bonds – he explains.

If rents for rent increase, investors will return to the real estate market

When will you ask to return? Much depends on how strong interest rate growth is. And also what will happen next with the rental rates, which so far are increasing from month to month. However, they cannot grow to infinity, because now Rental rates are barely acceptable – explains Jaroslav Sadovsky.

The expert adds that the return of buyers to the real estate market depends on two factors.

If housing prices go down or rent rates go up even more. Then it will be profitable for cash investors to buy apartments for rent again – claims Jaroslav Sadovsky.

In his opinion, there is no chance for customers who buy real estate to return for a loan, because interest rates are too high. The creditworthiness of the Poles is very low at the moment and there is no indication that it will improve in the near future. It is also unknown when interest rates will start to fall, he adds.

Government promises should be seen as political marketing

The expert also believes that there is currently no news on the property market that could bring some optimism. Analysts are already talking about a possible 20% inflation this year. Everyone is calculating how much their loan installments can increase, prompting some to sell real estate – he says.

It also draws attention to the fact that the rulers have absolutely no idea how to deal with the situation in the real estate market. – Therefore, I am afraid that in the coming year any promises of new programs in the real estate market should be treated as political marketing – he adds.

Some, in order to survive difficult times, will stay with their families

What are the scenarios that may await us in the near future? This is mentioned by Tomasz Beszynski real estate market It is cyclical, which means that after a bull market comes the so-called alcohol market. For people with more experience in the real estate market, the present may be positive. Our interlocutor says that those who refrained from buying in previous years will now be able to buy real estate for reasonable money.

He adds that many people will now optimize costs. What does that mean? Instead of selling an apartment or house renting some. He adds that they themselves, in order to survive in difficult times, will live, for example, with a family.

However, in his opinion, the development of the situation in the real estate market will largely depend on how the economic situation will develop.

If upward pressure on energy prices increases, so will labor costs. In turn, entrepreneurs, if orders fall, may start slowing down, improving their costs. Then unemployment will also rise, which will have a negative impact on the real estate market. Moreover, people who have lost their jobs will not be able to get a loan. So the coming months will be a test for everyone – in short Thomas Błeszyński.

Agnieszka Zielińska, money.pl . journalist

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