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Examination of the potential determinants of demand on the Polish residential housing market in the years 1995-2008. Dariusz Pęchorzewski, Phd Szczecin Renovation Centre Institute of Economic Analyses, Diagnoses and Forecasts. Introduction Reactions to crisis in global economy:

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Dariusz p chorzewski phd szczecin renovation centre

Examination of the potential determinants of demand on the Polish residential housing market in the years 1995-2008

Dariusz Pęchorzewski, Phd

Szczecin Renovation Centre

Institute of Economic Analyses, Diagnoses and Forecasts


Dariusz p chorzewski phd szczecin renovation centre

  • Introduction

  • Reactions to crisis in globaleconomy:

  • Increasing uncertainty in the global economy

  • Desire to take better economic decisions

  • Search for accuracy and stability

  • Attempts to find reliable aspects of the economy


Dariusz p chorzewski phd szczecin renovation centre

  • Research

  • Study of the relationship between demand for and prices of real estate, and standing of the economy measured by:

  • GDP dynamics,

  • level of unemployment,

  • main index of Warsaw Stock Exchange – WIG-20,

  • interest rates.


Dariusz p chorzewski phd szczecin renovation centre

Research cont.

Examination of increasing and decreasing trends in potential determinants of demand during the research period

in order to

analyze the impact of positive and negative changes on the real estate market.


Dariusz p chorzewski phd szczecin renovation centre

Research cont.

Time delays between variables (determinants)

Capture time in which real estate market responds to changes in the determinants


Dariusz p chorzewski phd szczecin renovation centre

  • Research cont.

  • Variables describing development of real estate market:

  • Realized demand for dwellings - sum of prices received for all transactions registered by the tax office.

  • Average transaction price of1 square meter during research period in the right-bank part of Szczecin.


Dariusz p chorzewski phd szczecin renovation centre

* - The first three quarters of 2008.

Figure 1. The evolution of demand for dwellings in the right-bank part of Szczecin in the years 1995-2008.

Source: Own calculations based on data from the 3rd Tax Office in Szczecin.


Dariusz p chorzewski phd szczecin renovation centre

Figure 2. Evolution of the average transaction price of 1 sq. m of dwellings in the residential housing market in the right-bank part of Szczecin in the years 1995-2008.

Source: Own calculations based on data 3rd Tax Office in Szczecin.


Dariusz p chorzewski phd szczecin renovation centre

  • Potential determinants of real estate market

  • Stock exchange index WIG-20 - its formation during the period can be divided into four stages - two increases and two decreases.

    Phases:

    - 1st phase - period of growth from 1995 to 1999,

    - 2nd phase - decrease in the period 2000-2003,

    - 3rd phase - four-year phase of increases, terminated by the current global financial crisis,

    - 4th phase - decrease.


Dariusz p chorzewski phd szczecin renovation centre

  • Potential determinants of real estate market

  • Average levels of stock market index

    - force and direction of relationship with demand and average prices was measured using the Pearson correlation coefficient.

    - relationship studied both with and without time delays (delays taken into account increased quarterly from 1 quarter to 2 years).


Dariusz p chorzewski phd szczecin renovation centre

Table 1. Pearson coefficients of correlation between the development of WIG-20 and the demand for dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

Table 2. Pearson coefficients of correlation between the development of WIG-20 and the average price of 1 sq. m of residential dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

  • Potential determinants of real estate market

  • Interest rates - price of money.

    Six sub-periods were identified in the years 1995-2008.


Dariusz p chorzewski phd szczecin renovation centre

Table 3. Pearson coefficients of correlation between changes in interest rates and the demand for dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

Table 4. Pearson coefficients of correlation between changes in interest rates and the average price of 1 sq. m of residential dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

  • Potential determinants of real estate market

  • Rate of unemployment

    In the years studied, three phases of changes in the unemployment rate in Szczecin were discerned.


Dariusz p chorzewski phd szczecin renovation centre

Table 5. Pearson coefficients of correlation between changes in the unemployment rate and the demand for dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

Table 6. Pearson coefficients of correlation between changes in the unemployment rate and the average price of 1 sq. m of residential dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

  • Potential determinants of real estate market

  • Dynamics of gross domestic product

    During the study period, a total of six phases were specified.


Dariusz p chorzewski phd szczecin renovation centre

Table 7. Pearson coefficients of correlation between changes in GDP and the demand for dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

Table 8. Pearson coefficients of correlation between changes in GDP and the average price of 1 sq. m of residential dwellings in the right-bank part of Szczecin.

Source: Own calculations.


Dariusz p chorzewski phd szczecin renovation centre

  • Main findings

  • The most important factor determining demand for dwellings during the period analyzed was shortage of residential housing.

    This makes it very difficult to conduct research into regularities in the real estate market. It will not be possible to conduct more reliable measurements until the market is saturated.

  • Real estate market reacted more quickly to negative than to positive signals during the study period.

    Negative signals caused quick response in demand and prices. Positive changes needed to consolidate in economy before strong reaction of real estate market occurred.


Dariusz p chorzewski phd szczecin renovation centre

  • Summary

  • Results obtained should not be regarded as stabilized.

  • Some results may be burdened with a degree of randomness or coincidence.

    However, grounds for making conclusions about existing or emerging regularities have been discovered.


Dariusz p chorzewski phd szczecin renovation centre

  • Summary cont.

  • Development of Polish real estate market has lasted only 20 years.

  • Market mechanisms have been disrupted by attempts to adapt quickly to free market mechanisms.

  • There has been a qualitative change in the research period - Poland's accession to the European Union.

  • Study period included initial phases of global financial crisis.

    Therefore, search for regularities is difficult and subjective.

  • Observed relationships were strong and statistically significant.

    There is hope that it will be possible in the future to accurately predict changes in the real estate market.


Dariusz p chorzewski phd szczecin renovation centre

Thank you for your attention

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tel.: 091 43 23 120fax: 091 43 23 130e-mail: [email protected]

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