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Across the European Union, real estate market growth is noticeably slowing, impacted by high-interest rates and inflated energy prices. This is influencing choices at the very top, leading to waves of pressure across a number of European markets to change tact and adapt.

Restrictive financial conditions are leading to mortgage rate increases across the world, not just on the continent, making home affordability an unlikely outcome for many consumers. Experts have argued the point that prices were already unsustainable, so consumers contending with inflation and high energy costs are being priced out even further.

Add to this an increase in lending rates and more restrictive lending criteria, many predict an erosion of credit demand throughout 2023. This is most evident in Germany’s housing market, where property prices increased by more than 50% since 2015. It’s evident that perspectives need to change fast.

Changing real estate perspectives

Aside from the financial implications at play across Europe, there is something to be made of public policy. Nations showing stronger signs of recovery are making changes at the state level to counteract the forces at work.

However, it’s a far cry from corner-cutting – these policies are dramatically reimaging property processes across all phases, from construction to habitation. Property professionals across the length and breadth of the industry now have a role to play.

After the financial crisis in 2008, policy change centred on green initiatives and social stability outcomes. We’re beginning to see those come to fruition as we move ever closer to the deadlines set by the European Commission.

These goals, ensuring that climate, energy, transport and taxation policies support a 55% reduction in greenhouse gas emissions by 2030, can help to change the housing market for the better, as they each represent a significant part of the dilemma that housing has found itself mired in.

But with consumer confidence at a low ebb and disposable income eroding year on year, some of the burden to reinvigorate trust falls on professionals working in and adjacent to the property industry, especially in growth areas like Poland.

real estate spending proptech poland

Tracking Poland’s progress

While much research centres on the bloc’s largest economies, it’s important to reflect on a more representative example across the CEE region. Poland, for example, has been through a rough year with regard to its housing market, enduring fresh waves of COVID-19, the war in Ukraine and the resultant influx of refugees, as well as rising inflation and increasing energy costs not unlike the rest of Europe.

In the Spring, to compound the matter, Polish lawmakers brought in a new rule for lending, which meant that banks had to adjust interest rates when calculating creditworthiness, which lead to a downturn in demand for credit.

There was also the additional complication of the Law of Developer’s Guarantee Fund, which expedited new investments coming to market while conditions were unstable at best, impacting interest rates even further.

However, despite the challenges it has faced, JLL says that against a backdrop of tanking consumer confidence and a cocktail of financial pressures, real estate sales in the last quarter of 2022 saw only a “moderate decline” compared with 2010-12.

Aleksandra Gawronska, Director of Residential Market Research, JLL, said: “The development industry reacted quite calmly, reducing supply and limiting new construction in the second half of the year. There were various incentives for buyers. Development companies entered 2022 in good financial shape, and investments in progress had high levels of units sold.

“In addition, credit vacations helped borrowers to maintain liquidity. However, the decline in sales is a threat to investments started in 2022, unless sales start to pick up quickly. For now, however, the number of finished units which in major cities are unsold is small – between 6% and 17%. It is worth recalling that after the previous crisis it exceeded a third of the offer in several cities”

The commercial sector remains strong

Before the pandemic, Poland’s commercial real estate market had gone from strength to strength, breaking investment value records year after year. In 2019, commercial real estate transactions amounted to around €8 billion, defying rising construction costs and decreasing land availability.

Poland remains to be one of the most alluring prospects for foreign real estate investors for office, retail, hospitality and industrial real estate, which are often viewed as stable assets for investment even when set against unstable economic conditions.

It is the office market which sits firmly at the top of the tree. As the largest commercial real estate sector in Poland, office space accounts for around half the transaction volume in the wider commercial real estate market. Although it took time to recover after the pandemic, the office market in areas like Warsaw and Krakow are both considerable driving forces in Polish real estate investment.

However, for all the positives it holds, hybrid working has slightly unsettled the natural order of things as it has been successfully implemented across many of the nation’s biggest organisations and is expected to continue. This forces yet another shift in the minds of organisations across the country.

What this means for commercial real estate is that building owners and managers are seeking out solutions to handle the increased demand for flexibility, with some more successful than others, and there is an increasing emphasis on digital transformation.

real estate transparency index jll

The mentality shift

When it comes to real estate transparency, as far as the Central and Eastern Europe region is concerned, Poland remains ahead of its nearest neighbours as per The Global Real Estate Transparency Index (GRETI), a document issued by JLL and LaSalle Investment Management which looks at technology adoption, among other things.

In the latest rankings issued by JLL, Poland sits in 20th position ahead of the Czech Republic (21st), Hungary (23rd) and Slovakia (27th). Perhaps most interestingly, the Czech Republic is gaining on its neighbour, rising four places from 25th in the last edition.

Mateusz Polkowski, Head of Research and Consulting, JLL, said: “The pandemic has strongly emphasized the role of modern technological solutions, thanks to which companies have maintained their business continuity and can now return to office buildings without any major obstacles.

“Therefore, the coming months and years will be marked by increased spending on innovation, such as in the area of proptech, thanks to which real estate will become even more secure for its users.”

Raising standards through digital transformation

While 2022 has been a bumper year for developers in Poland, with tens of thousands of permits progressing to the build phase as we move into 2023, a mentality shift is needed in the Polish property industry to ensure that things continue to move at pace.

As the number of new property developments in Poland grows and real estate becomes more transparent, a renewed emphasis on the importance of digital transformation comes with it, too. This can be seen by the number of technology startups laying down roots in Poland’s cities.

With a population of over 38 million, the country offers a large domestic market for proptech companies and access to well-educated talent, as well as proximity to other major European markets.

The market for proptech in Poland is going from strength to strength, with innovative solutions popping up to tackle compliance, building maintenance, inspections, property management, IoT and much more, and they’re welcomed, too.

Unlike countries in the western part of Europe, Poland tends to fall behind is in its building standards and legislation. Whether that’s in construction, renting, sustainability or any other area of the property industry, nations like the UK and Germany are at the cutting edge of safety and sustainability through a range of initiatives, independent bodies and acts.

Take the Building Safety Act, for example, or any other legislation that includes the provision of technology to make the built environment a smarter, safer place to live. From the local to the national level, through the Proptech Engagement Fund or organisations like REACH, proptech is finding itself woven into the fabric of UK law and the public consciousness.

Unfortunately the same cannot be said for Poland just yet. However, signs are strong and VCs continue to show interest in the region. With the increased demand for proptech, growth in property development and the opportunity to raise building standards and compliance while driving digital transformation in the real estate sector, Poland is in a strong position to better its regional standing and capitalise on its prior success, making building safety and sustainability better for everyone in the process.

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