Green Shoots - Economic indicators are beginning to have more relevance...finally.
Welcome to the new normal. Our last post made the point that we would simply not get involved in the projection game until there was a clearer picture of what was going on in the economy. We are getting closer to that point and the recent report from the EC Summer Economic Forecast puts some meat on the bones of previously sketchy data.
Firstly, anecdotally, we are hearing that while property sale prices have not (yet) dropped aggressively, demand is still high from buyers but issues with the Banks may put a wet blanket on this moving forward.
Bank profits and economic uncertainty have resulted in a tighter lending environment. We are hearing that some banks have been asking for up to a 35% cash deposit from borrowers.
We think that by the end of the year, or shortly thereafter, bank mortgage lending will return to normal. We also think property prices will begin to rise again.
We believe, however, that property values will have to drop from here if only to reflect the higher unemployment numbers. By how much we don't know.
A large part of our sunny outlook in the medium to long term is driven by the proposed huge injection of EU Covid-19 funds into the Polish economy, tempered only by the possibility of increased virus outbreaks.
Airbnb is essentially dead for at least another 3 months and reduced demand from students has driven prices down by anything from 20 to 40% depending on the city.
Uncertainty will push Landlords to offer whatever it takes to get some rental income in so we don't believe rental prices have hit the bottom yet.
We would also expect some pressure on management companies as they find it difficult to collect fees. Keep an eye on them as they try to recoup losses during any recovery.
The bottom line is, we do buy into the EC's forecast that Poland will fare substantially better than the average EU country. We are less hesitant to say this than we would have been two months ago but the risks to the downside are still very much in place.
Apologies for sounding a bit wishy-washy in our analysis but the more reliable data we see the more declarative we will become.
We trust you don't object and stay tuned for more updates as they arise.