Transcript file

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:

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
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.
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.
Research cont.
Time delays between variables (determinants)
Capture time in which real estate market responds to
changes in the determinants
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 of 1 square meter during research
period in the right-bank part of Szczecin.
* - 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.
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.
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.
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).
Delay in
quarters
0
1
2
3
4
1st phase increase
0,435468
0,448952
0,479174
0,435563
0,551499
2nd phase - 3rd phase decrease
increase
-0,29483
0,499273
-0,08711
0,514788
-0,31443
0,532014
-0,72401
0,608657
-0,86036
5
0,570784
-0,62045
6
0,330244
-0,51472
7
0,223162
-0,42466
8
0,389849
-0,35328
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.
Delay in
quarters
0
1
2
3
4
1st phase - 2nd phase - 3rd phase increase
decrease
increase
0,692473
0,824122
0,888765
0,681808
0,847866
0,918871
0,703617
0,783328
0,938299
0,721791
0,422045
0,958861
0,719082
0,070917
5
0,73618
-0,08488
6
0,67653
-0,4496
7
0,627236
-0,60162
8
0,668871
-0,62818
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.
Potential determinants of real estate market

Interest rates - price of money.
Six sub-periods were identified in the years 1995-2008.
Delay in
quarters
1st phase - 2nd phase - 3rd phase decrease
increase
decrease
4th phase decrease
0
-0,75612
0,037243
-0,69372
-0,52182
1
-0,73458
0,219332
-0,58937
-0,53453
2
-0,51336
-0,77092
-0,3434
-0,15425
3
-0,58895
-0,75305
0,111605
0,265717
4
-0,73062
0,010939
0,128363
0,024501
5
-0,69218
0,826691
-0,21114
-0,1627
6
-0,46096
0,735308
-0,47311
-0,28562
7
-0,31417
0,917878
-0,46011
8
-0,21322
0,621917
-0,42857
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.
Delay in
quarters
1st phase - 2nd phase - 3rd phase - 4th phase decrease
decrease
increase
decrease
0
-0,93033
-0,26155
-0,464429
-0,46232
1
-0,93111
-0,89778
-0,13707
-0,5316
2
-0,93311
-0,83361
-0,47593
-0,60861
3
-0,93236
-0,84147
-0,63777
-0,70851
4
-0,91563
-0,86902
-0,72295
-0,7969
5
-0,89801
-0,74257
-0,80158
-0,87091
6
-0,87062
-0,87876
-0,87729
-0,942
7
-0,85549
-0,74062
-0,87504
8
-0,83405
-0,70441
-0,88753
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.
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.
Delay in
quarters
1st phase - 2nd phase - 3rd phase decrease
increase
decrease
0
-0,75589
0,44466
-0,58874
1
-0,75144
0,553034
-0,63197
2
-0,66356
0,465259
-0,11207
3
-0,56409
0,491522
0,351762
4
-0,68687
0,571736
-0,16016
5
-0,74
0,642686
-0,46343
6
-0,50667
0,641012
-0,60048
7
-0,55548
0,738169
8
-0,57003
0,812109
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.
Delay in
quarters
1st phase - 2nd phase - 3rd phase decrease
increase
decrease
0
-0,95329
-0,25951
-0,86846
1
-0,93675
-0,22324
-0,92106
2
-0,94439
-0,19802
-0,94529
3
-0,94451
-0,07907
-0,94541
4
-0,94614
0,100718
-0,91749
5
-0,95961
0,265032
-0,90396
6
-0,94876
0,472813
-0,88731
7
-0,94554
0,630702
8
-0,92239
0,745256
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.
Potential determinants of real estate market

Dynamics of gross domestic product
During the study period, a total of six phases were
specified.
Delay in
quarters
1st phase decrease
2nd phase increase
3rd phase increase
0
0,037766
-0,40163
0,235926
1
0,41362
-0,33666
0,293524
2
-0,11855
-0,60652
-0,24607
3
-0,72144
0,630117
-0,43133
4
-0,84598
0,691342
0,287001
5
-0,80107
0,79637
0,236716
6
-0,77052
0,825276
0,560973
7
-0,39189
0,829215
8
-0,04725
0,847567
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.
Delay in
quarters
1st phase decrease
2nd phase increase
3rd phase increase
0
0,898735
0,747746
0,808805
1
0,926719
0,718523
0,821079
2
0,929896
0,765206
0,887067
3
0,856531
0,862252
0,936372
4
0,883245
0,842183
0,973398
5
0,508452
0,763716
0,915796
6
0,250143
0,826375
0,86243
7
-0,08609
0,814812
8
-0,48656
0,833575
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.
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.

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.
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.

Thank you for your attention
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