Why Has the COVID-19 Pandemic Had a Limited Impact on the Primary Housing Market in Poland?

Abstract

In this paper we present the first insights into the as yet unexamined impact of the COVID-19 pandemic on the primary housing market in Poland, with a focus on Warsaw, which is the largest real estate market in the country. We explain the structural features that allowed the market to return to pre-shock levels after the pandemic shock. After the 2007–2008 global financial crisis the negative consequences lasted for several years. This time a sharp monetary policy and fiscal intervention was carried out. Moreover, the developer sector has expanded its production capacity. We show empirically that through monopolistic competition developers were able to restrict the excessive demand that was observed before the COVID-19 pandemic broke out. Another important structural change was the increase in the demand for housing, mainly for investment purposes, which was financed predominantly with cash and contributed to the growth of the rental market.

Financial Efficiency and Investor Behavior on the European Real Estate Market in the Rising Inflation Environment

“…This phenomenon is driven by the perception of real estate ownership as a symbol of household stability and economic security, with low-interest loans further encouraging credit-financed home purchases. Lastly, Augustyniak et al (2021), Bełej (2021) and Frodsham (2023) discussed various macroeconomic factors contributing to the significant increase in both supply and demand in the Polish real estate market in recent years.…”

The housing market in Poland during the Covid-19 pandemic

“…Despite the outbreak of Covid-19, the Polish housing market did not experience a significant downturn. According to H. Augustyniak, J. Łaszek, and K. Olszewski [18], the impact of the pandemic on the primary housing market in Poland, with a focus on Warsaw, was limited. Moreover, the retail market in Poland functioned without anti-covid restrictions, and retail sales in constant prices increased by 19% in April and May 2022, as reported by K. Lipka [19].…”

“…Figure 4 shows how atypical 2020 was compared to the year before and the year after in terms of the number of housing units completed. It is worth noting that in the first half of 2020, there was a shortage of construction materials, especially insulation materials (Styrofoam) [12][13][14][15][16][17][18][19][20]. This prevented the commissioning of many facilities.…”

Applying the AD-AS Model to the Housing Market of Post-Socialist Economies

“…The aggregate demand function for housing units in the six largest cities can be estimated with a simple linear regression, similar to the one applied by Augustyniak et al (2021) to the Warsaw housing market. 2 The aggregate housing demand (𝐻𝐷 𝑡 ) is determined by the house price Pt and its growth, the interest rate 𝐼𝑛𝑡𝑟𝑎𝑡𝑒 𝑡 , and income 𝐼𝑛𝑐𝑜𝑚𝑒 𝑡 .…”