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Why is demand for housing on the rise? The paradox of the real estate pandemic

29 of May '20

Pandemic time is a difficult time for us, economically and socially unstable. It has a hard-to-estimate impact on the future economy of the country and the world. Many people have returned to their family homes for the quarantine period, leaving apartments in the center of cities in favor of being with loved ones away from the hustle and bustle and media panic. Why, then, has interest in buying or renting an apartment increased rather than decreased, as the changes caused by the pandemic would suggest? We will try to consider this problem based on the knowledge and insights of sociologist Joanna Erbel.

Our interviewee is a housing expert and a member of the Rent Market Laboratory thinktank ( Her latest book "Beyond Ownership. Towards a successful housing policy" addresses housing issues, which is one of the three most important social problems for Poles and Polish women (we published the chapter Going New on our website). And COVID-19 concerns about the stability of the market by no means diminish them. Why is the demand for housing increasing? Is there actually anything to worry about?

pic: Michal Loba

how has the pandemic affected the real estate market? Short and long changes in the market

The pandemic radically affects entire segments of the economy - it is no longer an individual problem of an individual, but a global reorganization. Prices in the housing market yes, have fallen dramatically, but mainly in the aspect of short-term rentals. In the long run, the decline in income associated with unstable and limited earnings will prove to be a more permanent and key phenomenon affecting the real estate market. The loss of people's livelihoods is disproportionately greater than changes in housing prices, which will fall slightly or not at all for long-term rentals or permanent purchases. Cheaper units will actually appear on offer in small numbers, as the commercial rental real estate market is only a fraction of the total housing segment.

But in a few years the situation will be different. As part of the anti-crisis shield, Deputy Prime Minister Jadwiga Emilewicz announced a new program to support TBSs (companies that build apartments for rent with moderate rent). They and the PFR Real Estate company implementing the Mieszkanie Plus program will be the ones to build affordable housing that can be rented out on long-term stable contracts. In addition, as part of the anti-crisis shield, rent subsidies have been introduced for people who find themselves in a difficult situation - including those who rent apartments on the private rental market.

This is a huge breakthrough, because until now neither the government nor local governments were interested in affordability in the commercial market. Joanna Erbel hopes that this will also make these apartments and the fate of tenants in the private rental market a relevant topic for politicians.

drawing by Michal Loba

reasons for increased demand - what do we need?

On the one hand, we are losing income, so our means for consumption are being reduced. On the other hand, this applies mainly to the less affluent part of society - those who have significant wealth can successfully allocate part of it to favorable real estate market offers. According to the survey, there is an increasing interest in buying more and more residential areas - nowadays, the most common search for offers of about 100-square-meter houses (previously the average was 60 sq. m.) and 60-square-meter apartments (previously 40-square-meter units dominated). Why? The need for space! Recently, we have experienced uneasy restrictions on leaving home and functioning in public places in the face of which our sense of isolation and confinement has become unbearable, especially on a small square meter. The conclusion? The preferences of those looking for housing are changing, regarding the size and amenities of the proposed units. Balconies, terraces, gardens, spacious rooms and large windows - these are undoubtedly huge assets of market proposals from developers.

Although the pandemic is causing an inevitable economic downturn, not all entrepreneurs and households are losing money. A part of the population has remained at an unchanged level of wealth or their income is increasing for various economic reasons. And consumption - except for the Internet - is virtually non-existent. Then comes the idea of investing in an apartment, perhaps larger than before or in a more favorable location for future years. In addition, free time can be spent on careful interior design and arrangement - the renovation boom of recent months is surprising!


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