On the problems of housing construction in 2023

The slowdown in investment continues

From the point of view of the current economic situation, the most important category of housing construction statistics is data on apartments whose construction has begun. In total, construction of 189 thousand apartments and private houses started in 2023 (this is 5% less than in 2022). Of this amount, in 2023 the developers themselves began construction of almost 115 thousand premises, which is almost the same as in 2022.

From the point of view of the current economic situation, the most important category of housing construction statistics is data on apartments whose construction has begun. In total, construction of 189 thousand apartments and private houses started in 2023 (this is 5% less than in 2022). Of this amount, in 2023 the developers themselves began construction of almost 115 thousand premises, which is almost the same as in 2022.

However, it is worth emphasizing here the very low base of 2022, in which the annual statistics of new buildings practically collapsed.

Last year, the introduction of the preferential lending program “Safe Loan 2%” significantly increased the demand for new apartments by a record 40% (year/year). In this situation, the natural course of events would seem to be a significant acceleration in the addition of proposals and the launch of new construction projects by developers. Unfortunately, nothing of the sort happened, resulting in the supply of new apartments drying up and prices in Poland's largest metropolitan areas rising by an average of one-fifth.

The situation is even worse for individual investors. Last year they started construction of only 70 thousand houses, which is 15% less (year/year).

Another failure in building permits

The situation is much more pessimistic in terms of new planning permissions or planning applications received in 2023. 241 thousand administrative decisions were provided, which means a decrease of almost one fifth compared to 2022. A very similar year-on-year decline was observed among both developers and those building housing for their own needs, with the result of 162 thousand and 72 thousand units, respectively.

Statistics on permits for new construction are the main parameter for developers to assess the potential of market demand in future periods. Therefore, it is clear that the optimism of the development industry regarding the prospects for economic development of the primary housing segment in the long term remains low, despite the initiatives of the government, which decided to stimulate demand for apartments with billions of dollars in subsidies for housing loans.

Apartment commissioning also fell

In 2023, the Main Statistical Office counted just over 220 thousand completed and put into operation premises, i.e. 7% less than a year earlier. This is the first decline in this data category since 2014, i.e. since the beginning of the largest and longest boom in the Polish housing sector. Thus, completed apartments joined the downward trend of the other two categories of housing construction.

The above statistics are the result of the economic situation that developed approximately 2 years ago and do not reflect its current state. For a long time, it was practically a foregone conclusion that in this area the weakening growth trend would eventually give way to a decline, which became a fact in 2023, thereby confirming the slowdown in the investment situation in the primary segment of the housing construction market.

The prospects for 2024 year are in doubt

After 2022, which turned out to be a period of sharp decline in sales of developer apartments, 2023 was marked by a continuation and deepening of the decline in housing construction. Therefore, we have to deal with further searching for the bottom of this downward trend. The question, however, is at what level this bottom may be.

New housing investment and building permits overall have regressed over the two years to 2016 levels. Unfortunately, this has led to a situation of reduction and insufficient supply by developers in the primary market, which occurs in the context of stimulating demand for housing through successive government programs for subsidizing mortgages. Meanwhile, the prospect of increasing the production capacity of developers in 2024 still remains a big question, and the constant risk of growing imbalance between supply and demand continues to complicate the market situation and threatens to continue the trend of increasing prices per square meter of new apartments.