A residential property - what makes it a good dwelling?

In the previous post I attempted to unravel factors which impact attractiveness of a property's location. As a follow-up to those musings, I complement them with thoughts on features of a specific dwelling, which make it a comfortable place to inhabit.

Layout is the key, I would respond, if somebody asked me about only one characteristic to be taken into consideration. The term, nevertheless is broad is could be broken down into a few sub-features I pay attention to.

Shape of rooms determines their functionality. A possible square-like rectangles are preferable. I am not fond of hexagons, triangles, half-circles and the likes. Tram-like rectangles also do not add to practicality of an interior.

Most people appreciate natural daylight at home, hence reasonably large windows, orientation of rooms against cardinal poinst and lack of nearby buildings which obscure the sun play a vital role in choosing a flat. I am of the opinion too much sunlight in summer might be cracked down on with blind rollers, while insufficient sunlight cannot be made up for. My own preference would be to have a living room with windows facing south and/or west, kitchen to the east and/or north, while for bedrooms I have no clear preference, albeit I lean towards getting up with the sun, so I tilt towards eastern exposure.

With respect to the layout, one of major questions is whether to have kitchen as a separate room or to make it a part of a dining or living room, often with limited access to daylight (no dedicated window). I see drawbacks of both solutions, but lean towards a separate room with a table for daily dining. Nevertheless in crampy dwelling a kitchen combined with a living space appears to be the most reasonable choice.

Before COVID-19 the optimum number of rooms (in Poland we count rooms, unlike in the UK, where bedrooms are counted) was equal to the number of inhabitants, e.g. a dwelling suitable for a 2+2 family would consist of a living room and 3 bedrooms. These days, when people work from home, one could argue more space is needed to fit a dedicated desk, yet not necessarily in a separate room, such needs could be met by larger bedrooms too.

A storey on which a dwelling is located does matter too. The higher you live, the more sunlight and the less noise you get. I am not fond of ground floors and last floors. I actually do not mind neighbours above me, but the prospects of heating up or leaking roof would not encourage me to live on the top storey. Also the lack of lift on higher storeys is a nuisance. It is healthy to take the staircase, however I prefer it to be a choice, not a must.

The last, yet quite important to me element are amenities outside a dwelling:
- a balcony or a terrace (to hang out in warmer half of the year),
- a basement (to store tyres, bikes and other stuff not most desirable at home) and
- a garage (no need to mention the comfort of having a vehicle protected from the elements of weather).

Again, the good features a property has, the more expensive it is. Needless to say, comfort of living has its price.

A residential property - what makes it well-located

After a note on the prospects of the property market for Poland, some random musings over features a comfortable dwelling should have. I split my considerations into two posts, with the next one about the very property characteristics and today's post focusing on location only.

Experts in unison claim location is the core driver and property intrinsic value, since it cannot be subject to makeovers or refurbrishments. Valuation of a location might be triggered by changes in surrounding areas, which are beyond a property holder's control.

A good location for most people means access to transport links, including reliable public transport, paved roads in the countryside, lack of traffic jams or dual carriageway in the (not too close) vicinity. Commute times to workplaces and schools are usually the best benchmark for one's individual preference, however they might change over time (one day children finish school, you may change a job or your office might be relocated).

For me a decent location is the one where I am not car-dependent. Trips to work and getting about town should be convenient with public transport (cheap, reliable, frequently running), by bike or on foot. I am not giving up on motoring, yet the car should wait its turn for longer trips outside Warsaw and for situations when it is indispensable.

While living next to one of busier streets in Ursynów, with 4 lanes in both directions and drivers tending to speed through a section just outside my window, I got sensitive to noise. When buying a next property (most probably a bigger flat), I will strive to avoid dwelling where the level of traffic noise increases drastically after opening a window. Same goes about the air quality. In Warsaw, despite traffic-generated air pollution it is still far better than on the outskirts or in provincial Poland, where folks still incinerate whatever cheap they can to heat their houses.

Although online shopping is getting more popular, avoiding visits in grocery shops and supermarkets is impossible. A well-equipped shop in which most or all everyday needs can be met, located within walking distance from home is a vital determinant of a proper location.

Green areas - parks, forests, meadows in the vicinity are definitive upsides, but trees and grass instead of paved areas in the immediate neighbourhood appear equally important, especially when they give shelter from more and more frequent summer heat.

Needless to say each of us has amenities appreciated within walking distance from home. These include nursery and primary schools, bakeries, restaurants, hairdressers, health centres, community centres, playgrounds, swimming pools, gyms, libraries, craftsmen. The infrastructure for comfortable daily life also defines what the note is about.

Last, but not least (note the phase has been overused in essays written during high-school English classes), the housing density matters. It is not a pleasure to see your neighbour's dwelling from your window, not to mention other buildings take away sunlight, especially in autumnal and wintry months, when it is most yearned for.

Property prices generally tend to incorporate the factors above, but they are subject to fads. Some districts are considered prestigious, others unattractive, despite having all makings of a decent location. Some does of cool head and not following the crowd might help find a superior price-to-quality trade-off when searching for a place of residence.

Property market in Poland – going bonkers indeed?

As prices of residential properties soared in a double-digit pace in Poland in recent months, pricing several first-time buyers out of the market, many wonder, whether the market is already red-hot, how big the imbalance of it is and where the property prices are heading. I will try to come up with a cool-headed analysis, with my judgements underpinned by 3Q2023 NBP and Amron-Sarfin reports (charts come thereof).

Looking at the past two decades, one sees property prices skyrocketed between 2005 and 2007, then levelled off on unsustainably high level, to decline by 20% - 25% in nominal terms by late 2012. For the next five years dwelling prices where in a slight uptrend, which began to accelerate in 2018. In nominal terms, peak levels from 2008 were hit over a decade later. The pandemic did not cool the market down, but the increasing interest rates did it in 2022. In nominal terms prices levelled off, but upon the inflationary adjustment, they fell by 15% - 20% within one year. Then in the second half of 2023 prices increased again, driven by a generous mortgage subsidy programme…

Looking at the graph which shows how many square metres an average salary in major Polish cities would buy, one could infer the market has not gone crazy. The underlying analysis by NBP has some critical drawbacks:
1) salaries are gross-of-tax, which fails to take into account changes in taxation (Polski Ład), which benefitted those who earn less, but hit the middle class,
2) it does not take into account costs of living, especially:
- a portion of net-of-tax wages need spent on payments to landlord by those who reside in rented flats,
- rising costs of basic expenses, such as dwelling upkeep costs and nutrition.

As I coincide with the conclusion dwellings were most affordable in 2016 and 2017, the uptick in affordability in 1H2023 is doubtful given that salary growth did not catch up with rising costs of living around that time.

Analysts from Amron-Sarfin have come up with an enhanced housing availability index, which takes into account more factors, including purchasing power of disposable income and access to mortgage lending. According to their measures, the dream of an own residential property was harder to come true already in 2021 and by the second half of 2022 it declined to levels unseen since a decade. Currently an ordinary man finds it as difficult to buy a flat, as they did in 2011.

Arguably, the property market in Poland is not in a most buyer-friendly shape, but let’s look where it might be heading.

The factors which are likely to drive property prices up are:
1) ongoing first-time buyers schemes extended recently by the government – in Warsaw given the tight criteria they will not spoil the market badly,
2) overall conviction of market participants that prices will go up, turning into self-fulfilling prophecy (this means bubble-like conditions),
3) stringent technical requirements residential buildings from the primary market must meet – they elevate construction costs and jack up property prices on secondary market too,
4) supply constraints – as property developers still have it uphill to get the planning permission.

On the other hand, the market is facing some headwinds, which makes good news for buyers:
1) interest rates remain on a high level and prospects for a material monetary loosening are weak,
2) rental yields are already low – current net income from dwelling subletting is these days lower than on a bank deposit or from government bonds, while risk and liquidity of property investments is incomparably higher,
3) the long cycle is drawing to a close, as examples of countries where prices began to rise earlier than in Poland (Germany, Scandinavia) show,
4) more and more buyers are priced out of the market, which dents the demand.

I have no bloody idea which group of factors will have a bigger impact on the market in real terms (note property price growth below in the inflation rate is an actual decline), but there are several solutions, which might let ordinary people have their housing needs met.

Firstly, let’s build more dwellings, yet without allowing for pathological solutions (which should be theatrically verified by the free market, but under conditions of constrained housing availability, such mechanism does not work).

Secondly, levy taxes on multiple residential property owners (those in possession of more than two properties), which would be progressive (higher tax rates for each next dwelling) and  which would hit harder uninhabited (including not sublet) dwellings. This would curb speculative purchases, which have done a lot of harm to the market (a flat bought for speculative purposes is empty, i.e. not rented and a speculator bets they will gain only from value growth, which is typical for a bubble-like market).

Thirdly, increase protection of landlords – sadly tenants are overly protected by the law in Poland and hence many property owners are afraid of subletting their flats. With a higher supply of flats, rents would go down, which would mean demand from investors would decrease and properties would become more affordable to those who seek their own roof over their heads.

Bielany - a new place to live

Just for the record - after two weeks of attending castings (finding a flat to rent is not a matter of one day, unless you have no expectations and no price ceiling) on Thursday I have finally been chosen to become a tenant. My new, hopefully temporary, place is somewhere between Wawrzyszew and Młociny underground stations. I have transported nearly all my stuff (the last batch today in the evening) to mere 25 square meters in a ten-storey block built in late 1960s, yet cosy and functionally furnished that will be my dwelling until I find my own flat (have two under negotations, oddly enough one is Flat 3 from that post, partly refurbrished, but put up for sale at the same price. Keep fingers crossed.

Tomorrow the chapter will formally be closed, i.e. the contract for the flat we have rented will be signed over to my ex-gf and our common bank account will finally be closed. Then comes the time to enjoy the freedom. Still too early to take a well-balanced look back, but I am convinced this has been the right the decision.

But before this happens, some snaps from the new neighbourhood (next week).

Poles aged 30 – portrayed, but accurately?

From time to time journalists of Gazeta.pl (online flank of Agora S.A., one of the most influential, leftist-liberal, media holdings in Poland) come up with series of articles dwelling on social problems. Quite recently two of them encouraged readers of the portal, aged near 30, to share with wider audience how their dwellings looked and what their material status in terms of housing conditions was. I usually keep track of such series with some does of curiosity, but that time I impatiently waited for each consecutive article, then read each of them with bated breath and avidly followed record-long comment threads…

The larger project run in attempt to paint a collective portrait of generation of 30-year-old Poles began by posing a question why people born in early 1980s are reluctant to have children. In the next step journalists resolved to find out where and how those people live and how the finance their housing needs.

The first article is a string of brief stories which paint a bitter-sweet picture…

Kaśka, aged 32, and her husband co-rent a room in a bigger flat. It’s cheaper and more practical, yet at times inconvenient. Their salaries would suffice to rent a tiny flat in a shanty town, but they prefer a 20-metre room in a flat shared with other people. Tensions sometimes appear, but when they are in need, they may count on their flatmates. In the meantime they put aside money to have equity and get mortgage on more favourable conditions. As for now, no bank finds them creditworthy. Purchase of property with cash – out of reach.

Błażej, aged 30, lives with his girlfriend in her 42 sqm flat (probably inherited or bought by her parents, photo suggests it’s located in Służew, part of Mokotów district, Warsaw). Given his girlfriend’s and his earnings, they wouldn’t be capable to service any mortgage debt, nor to rent any flat. Their aspirations have been fulfilled. Probably hadn’t it been for the windfall (his girlfriend’s own flat), they would live with parents…

Agata, aged 31, and her husband live in a mortgaged flat. Shortly after getting married they lived in a rented flat, then when a child’s birth was imminent, they took out a loan. Month by month, they move closer towards “full ownership” of their flat.

Piotrek, aged 30, and his wife, with some support of their parents and bank financing, bought a 70 sqm on city fringes. In his view this was a fair trade-off between location and size. Debt burden is not excessive and the flat would be spacious enough when children are born.

Anka, aged 29, is also one of those better-off. Since she was 20 she lived in flats inherited after family, currently she and her husband live in a house built on a plot donated to them by husband’s parents. She’d be damned if she dared to complain about her housing conditions.

The stories above bring a moderate dose of optimism. All character manage, some better, some worse, but are satisfied with what the have and keep cheerful. When you begin to read next sent in pieces, smile is immediately wiped off you face…

Sferyczna, single woman, aged 30. Lives in Warsaw, but hails from provincial Poland. Worked for a while abroad, but has not managed to save any money. Currently rents a tiny room in a tiny flat and estimates is 5 years will be eligible for a mortgage. Interestingly, she claims to earn more than peanuts and still she declares she can afford very little…

Karolina, aged 31, and Marcin, aged 36, have one child and live in an old flat that could do with a comprehensive refurbishment. Mortgage is a huge burden for them, each unplanned expenditure or a second child would blow over their budget. Loan instalments make up more than half of their income – this speaks for itself…

Next piece contains two contrary opinions. Rafał, aged 31, and his wife wonder whether only grumblers are around. He wants his voice to be audible. Instead of grumbling his wife and he toil away up to 60 hours per week, have built a house and bring up two daughters. Not a word about any mortgage, but he mentions his father who runs a prosperous company. Despite having little spare time, he claims he is happy and encourages to sheer hard work, which, as he believes is a key to the door of financial and personal success.

Marek, aged 27, has co-rented a flat since coming to Warsaw 5 years ago. With his earnings, little more than 2,000 PLN after tax, he can only afford to rent a small flat and pay maintenance charges, this all sets him back some 1,500 PLN – after this he has 600 PLN to spend on food, travels, clothes, entertainment??? He sees future in anything, but bright colours – with his earnings he stands no chance to get a mortgage and own any property…

Need something upbeat, don’t continue reading… A 30-year-old single woman has just bought her own flat. The mortgage and refurbishment loans have both 23-year repayment schedules, but her own flat is a step forward after years of renting and sinking money to landlord’s pocket. Living conditions are pretty dire, but glimmers of hope bring about smile on her face. In a few months the flat will be finished. As for now, she saves on everything, including food and scrapes along, to service debt timely…

Another confession, written by a 29-year-old man. He works in a public sector, is employed for a finite period and earns minimum wage. No chance to move out of parents’ house, even to rent anything. No prospects of becoming self-supporting, of raising family, no feeling of stability. He’s angry with those who stigmatise his peers who keep living with parents. In fact many of them do this not out of fear of taking responsibility for their lives, of facing adulthood, etc., but they stick to their parents for purely financial reasons. When earning 1,500 PLN after tax, attempt to taste independence is like being thrown at the deep end… Hopes for future… None… just prospects of barely getting by…

Not yet miserable? Carry on! A 31-year-old single woman has a single-bedroom mortgaged flat, but she and her daughter live with her parents. The graduate of Polish studies and Journalism, since finishing school changed jobs many times. Each was supposed to have been temporary, before she found something more desirable. In 2010, with support of her parents and a bank she bought a flat. Soon after she was offered a new job, left the previous, well-paid one, and eventually was left out in the cold, because the new employer changed its mind. Never jobless, she had next temporary, poorly-paid jobs which allowed her to pay bills and mortgage instalments. A year after it turned out she was pregnant with a man who turned out to be too irresponsible to fulfil role of a father. To make ends meet, she moved to her parents and lets her flat to repay the mortgage… She wipes every night and slowly is losing hope for a better tomorrow…

Let’s face it – those letters have been picked out of several sent in to Gazeta.pl’s editorial room. The picture of the generation which emerges is a matter of who and on the basis of what criteria chooses which letters to publish.

More interesting are plentiful comment threads under the articles, counting several hundred entries. Comments can be divided into a few categories…

Predictably, quite a few commentators trot out the “young, educated, from big cities” myth – they argue the depicted misery bears a truthful testimony how in fact the “Green Island” looks like and what the youngsters got from the party they had voted for. How long before people realise politicians’ influence on people’s everyday is much smaller than they claim? Misery of many young people can’t be put down to “feckless rule of losers and traitors”, while if the biggest oppositional party came to power, it wouldn’t turn Poland into a land of milk and honey. Society and economy are driven by actions of millions of individuals, not by decisions and deeds of few politicians. They don’t have power to heal the country and, on the other side, have little power to screw things up. If I were to be malicious, I could say between 2005 and 2007 property prices in Poland soared by almost 100%, hence becoming less affordable.

Some commentators point out those stories do not hold water – why somebody takes out a loan and than changes a job, for a worse-paid one, how some of mortgage instalments calculations match with what somebody has left at their discretion, etc.? Some even claim the stories sound so incredulously that they appear concocted.

The more ruthless advise authors of the letter who take pity on themselves to blame themselves, not the rest of the world. Who made them choose dead-end studies? Who precluded them from working harder? Who told them to change jobs several times?

Other group indicate young Poles have over-inflated expectations regarding consumption and earnings, while it takes time to grow into wealth. The only way to consume more than you can afford to is living beyond means, which means living with a ball and chain in form of debts and praying luck streak doesn’t cease, as then the frail wealth collapses.

For my part – I have no right to complain… I’m better of in comparison to some 99% of my peers. I don’t live in my own flat, but this is only my choice – I can afford to rent or take out a mortgage, but since there’s no pressure to move out I keep living in my parents’ house (and give them little money each month) and put aside some 70% of my salary. I earn very decently and have prospects of even higher earnings, but on the other hand at the back of my hand there’s a seed of uncertainty – my employer knows how to send adrenaline rising and having seen people being fired (with 1-day notice and generous severance packages) I realise no matter how committed I am, one I day I can have an inadvertent slip-up or my employer may change strategy and back out of business segment I work at, resulting in my job contract being terminated. I have job contract for indefinite period and well-above national average salary, but in return am offered no stability. I don’t go mad with the awareness each day might be the last day of my work only because I don’t have to provide for a family and have no debts to settle.

I’m also far from sharing opinions of those telling those unhappy people to blame only themselves. Success, not only financial, is a combination of many factors, including parentage (if your parents are wealthy, you’re better off at the start), skills (many are inborn I believe, you may develop them or not, but if you really lack a specific skill, developing it won’t get you far), hard work (inborn skills without hard work are useless) and luck… Every day I happen to realise where I am now and what I do is just a stroke of fate… Of course I can’t pronounce it’s prudent to take dead-end studies in political sciences, change jobs frequently, or get pregnant with an immature man, but in some cases people are inarguably out of luck and telling them to blame themselves proves only lack of empathy. Not everyone has a chance to be born in the capital city, in well-off family, to have educated parents. Most people have it up-hill and in Poland I can’t honestly say others have it downhill.

I recently calculated, with my above-average earnings and possibility to put aside most of my salary, if I was to start saving from scratch now, I’d have to save for 6 years to buy an average 50 sqm flat in Warsaw, assuming property prices stayed unchanged. Some time ago I read an average Pole would have to save for 11 years their whole salary to buy such flat. Imagine this – live with your parents for 11 years, let them feed you, don’t buy clothes, cosmetics, don’t go out, don’t travel and after 11 years you can buy a flat for cash. If your parents can’t support you financially you can only take out a huge burden on your back and pray nothing goes wrong along the way. How young Poles live is an aftermath of still steep, in comparison to earnings, property prices in Poland. As many market specialist claim, only increased supply of dwellings could help solve this problem – this can be achieved in form of public-private partnerships – local governments building in partnership with property developers council flats for rent. But for this you need a proper legal framework and wise and honest people to run such schemes. Out of reach, just like own flat for an average Pole turning 30…

Apologies in advance for taking a break from blogging next week. I’m holidaying… At last :-)