Article citation information:
Żabówka,
R., Maciuk, K. Impact of the COVID-19 pandemic on real estate market in Cracow.
Scientific Journal of Silesian University
of Technology. Series Transport. 2022, 114,
211-224. ISSN: 0209-3324. DOI: https://doi.org/10.20858/sjsutst.2022.114.17.
Rafał ŻABÓWKA[1], Kamil MACIUK[2]
IMPACT OF THE COVID-19 PANDEMIC ON REAL ESTATE MARKET IN CRACOW
Summary. The purpose
of this study was to determine the impact of the COVID-19 pandemic on the
Cracow real estate market. The data used in the study included transactions of
purchase of flats and single-family houses. At the initial stage,
the database was reduced by applying a four-step selection and outliers
were removed. The data analysis included separate transactions for
single-family houses and flats, 5 different types of charts were prepared for
each type of real estate. The conducted research concerned: the analysis
of the number of transactions in subsequent years, the share of the number of
transactions in individual quarters, average transaction prices (for houses) or
average prices per square meter (for flats), analysis of the number of
transactions in individual districts, years and quarters, and a comparison of
the number of contracts in individual quarters given years. The main
conclusion drawn from the study is the significant impact of COVID-19 on the
number of house and apartment purchase transactions, while the pandemic did not
have a significant impact on the average prices in the analysed database.
Keywords: COVID-19,
real estate, impact, trading
1. INTRODUCTION
In 2020 Poland, Europe, and the whole world pandemic mastered crown virus COVID-19. COVID-19 and its effects are very dangerous that society, spreads it by droplet, and so while talking, coughing, or sneezing, and symptoms are similar the common cold, which makes it difficult to detect correctly. The virus can be asymptomatic, but it can even cause death or other serious damage to health. World statistics (as of 02/01/2021) say about 85 million infections and 1.8 million deaths (Kostyńska 2020). The whole situation had a strong impact on many economic areas, both in the country and in the world. This had a direct impact on the decline in GDP. In Poland, a decline in GDP is forecasted at 4.5% compared to 2019. Then, in 2021, another improvement and an increase of 4.2% (Duszyński et al. 2020). The announcement of the epidemic in Poland had a significant impact on many aspects of life in the country, both the social life of Poles and their financial situation changed. Many industries also plagued with problems, these include medicine, catering, sport, or tourism. It is also worth mentioning a big problem in the real estate rental industry. They recorded a large decline in the price of rented flats or rooms in many Polish cities due to a smaller number of students because of the remote learning (Kaźmierczak 2020), the largest decreases were recorded in the cities of academic, as Poznan, Warsaw and Rzeszow (Medicus Institute 2019).
Cracow is the capital of the province of Malopolska with an area of 327 km2 and 779 115 citizens (as of 12.31.2019) (Piątkowski 2019). Cracow occupies 2.2% of the Malopolska voivodship area, but in terms of population it is about 23% of the voivodship (Kałkowski 2005). This indicates a very large real estate market accumulated on a small area. The city consists of 4 main, "large" districts (Krowodrza, Nowa Huta, Srodmiescie and Podgorze districts, Figure 1).
Fig. 1. Distribution of
the four main Cracow’s districts
Source:
Skowron
2020
City might be also divided by 18, a smaller districts, the so-called local government (UMK 2018). The information on the area and number of inhabitants in each main district presents in Table 1.
Tab. 1
Information
on the districts of Cracow
|
The name of the
district |
Number of
residents |
Area [km2] |
|
Srodmiescie |
106,949 |
17,851 |
|
Krowodrza |
146,442 |
66,969 |
|
Podgorze |
262,050 |
130,889 |
|
Nowa Huta |
193,979 |
110,771 |
|
Total |
709,400 |
326,839 |
In
first half of 2020 in Cracow, a maximum decrease in interest in renting was
noted at the level of - 49.8 % (Drogomirecki 2020). So, the
question arises whether the real estate market is also experiencing a kind of
crisis? For this purpose, an analysis of the real estate market in Cracow was
carried out to determine changes in the market for the sale of apartments and
single-family houses in the city. Number of transactions and transaction prices
were analysed according to the types of real estate for the first 3 quarters of
2017-2020 years. This is due to the delay with which the databases of real
estate price and value registers are supplemented with data from the real
estate market. In connection with the 4th quarter of 2020 as a not
fully updated, not taken into consideration. To compare with the three previous
years, which also removed the quarter. This was to eliminate the factor related
to fluctuations in the real estate market caused by the period of the year,
usually the number of real estate transactions decreases in the winter.
Statistical
data on real estate turnover in Cracow are currently available only for the
years 2017 and 2018, for the remaining years they have not been published yet (Chełstowska
2018). In 2017,
apartments on the primary market achieved a high pace of sales, as evidenced by
reduced number of construction investments. The average price of apartments was
PLN (Polish Zloty) 7,000 per square meter, which increased by 12% compared to
the previous year. On the secondary market, the average price of a flat
exceeded PLN 300,000, and the average floor space of the flats purchased was 50
m2. Year 2018 is still characterized by high demand on the primary
housing market, but, similarly to 2017, the number of construction investments
decreased. This was mainly due to the decreasing number of land available for
investment in the city. Average price per square meter fell slightly but
continue oscillate around the vicinity of 7,000 PLN per square meter. There
were no major changes on the secondary market. The average price and floor
space of flats remained at the levels of PLN 300,000 and PLN 50 m2
respectively, similar to the previous year (Chełstowska
2019). According
to the (Majewski 2015) there is
no best time to buy a flat. Each of the annual quarters has advantages and
disadvantages regarding the decision to buy an apartment. These features
balance each other, so it is impossible to say which month is the best time to
buy.
In
this study, data were obtained from the Registry of Prices and Values Property
(RPVP, polish Rejestr
Cen i Wartości Nieruchomości) available in Cracow City Hall; as of 29
December 2020), for the years 2017-2020. This period results from the rules in
force in the City Hall, which allowed employees to provide only a 4-year period
of data for work purposes. The number of transactions was 22,164 (17,884
apartments and 4,280 single-family houses). The data was compared in terms of
the location of properties in a given district, the year of transaction and
average prices. The paper presents the data contained in the obtained real
estate database and the scope of their use. Based on the data, charts showing
the results of individual analyses were drawn together with comments. Finally,
a short summary is written, and the conclusions drawn are described.
2. DATA AND METHODS
The
work transactional data obtained for the two types of property traded for
single-family houses and apartments. Information about it has been assigned to
each transaction. The database contained information in the number of 61 items,
including e.g.: date of the contract, transaction price, type of rights to the
real estate or type of transaction.
6
out of 61 attributes were used in the work (Table 2), based on which the
analyses were carried out. Based on address specified districts in which there
is data of real estate, to analyse the number of transactions for each of the
main areas of the city. It is worth mentioning that these data do not include
transactions from December 2020, so in fact the exact period of the analysis
applies to the period from January 2017 to November 2020. In the case of 2020,
the exact number of transactions would not be known until April 2021. For the
results to be reliable, the transactions concluded in the four quarters of each
year were excluded from the analysis. After receiving the data, the database
was first divided into individual years, and then into individual quarters. The
next step was to filter incomplete and missing data.
Tab. 2.
Used attributes from RPVP
|
Information/Data |
Purpose of use |
|
Contract date |
Specifying the year and quarter of the transaction date |
|
Address |
Assignment to district |
|
Type of real estate |
Selection of transactions from a given type of market |
|
Buyer and seller |
Selection of pages |
|
Transaction price |
Determining the average transaction price per square meter |
|
Area |
While working with the database,
single errors in information about transactions were noticed, which did not
affect the size of the database, and some of them (such as the address) were
missing. Incorrect and incomplete data have been removed from the analysed
database. Then, a 4-step filtering of the 'raw' database was performed:
(1)
transactions removal from the fourth
quarter in each year
(2)
leaving only transactions between natural
persons, excluding any form of legal person and related
(3)
transactions on the free market, excluding
any form tender, discounted price, etc.
(4)
transactions with a 1/1 share in the
entire property
The numerical analysis of the
remaining data is presented in Table 3, the initial values are 17,884 and 4,280
sales transactions of apartments and single-family houses, respectively.
The
final number of transactions after applying the above-mentioned 4 filters are
12,045 apartments out of 17,884 at the beginning and 1,004 single-family houses
out of 4,280 in the entire base. Thus, the database is the subject of the
analysis was a 67.4% and 23.4% for apartments and single-family houses
databases respectively.
There
is no information on the area of single-family houses in the RPVP database, it
is available to appraisers after analysing the copies of notarial deeds
available at the starost‘s office. In this connection it was decided to
the analysis of average transaction prices and their volatility in the analysed
years. This analysis was carried out with the use of a filter for removing 10%
of real estates with maximum and minimum prices. There are therefore 897
transactions left for the analysis of average prices.
Tab. 3.
The
applied filters of the original database and the impact on its size
|
The filter used |
One-family
houses |
Residential
premises |
||
|
Transactions
left |
Remaining
percentage of initial value% |
Transactions
left |
Remaining
percentage of initial value% |
|
|
Initial number of transactions |
4,280 |
100.0 % |
17,884 |
100.0 % |
|
1/1 shares |
2,377 |
55.5 % |
17,250 |
96.4 % |
|
Only transactions between natural
person |
1,428 |
33.4 % |
15,386 |
86.0 % |
|
Transactions only in the free
market |
1,316 |
30.7% |
15,332 |
85.7 % |
|
Removal of transactions from the
fourth quarter |
1,004 |
23.4 % |
12,045 |
67.4 % |
The
price per square meter of residential premises in the period 2017-2020 was also
analysed (including the fourth quarter), based on the transaction price and the
area of the premises. There were large discrepancies in the price per square
meter in the database, and for the results to be more reliable, outliers were
excluded from the analysis. In the first place, transactions concerning
premises with an area smaller than 12 m2 and larger than 200 m2
were rejected. They were rejected due to the lack of availability of apartments
with an area of less than 12 m2 and apartments with an area of more
than 200 m2 were significantly different from other premises, these
filters were used based on data from the Otodom portal (“Otodom”
2021), where
the smallest area of studio available for sale in the area of Cracow was 12 m2
while the residential premises with an area of 200 m2 were removed
as outliers due to the small number available in the base, but mainly due to
the price per m 2, as they are often luxury apartments or
multi-unit flats. The second step was to eliminate residential premises sold
for prices outside the range of PLN 80,000 to PLN 1 million. The upper limit of
the transaction price was dictated by the elimination of apartments and multi-
apartment premises, while the lower limit was the price at which the cheapest
flats could be purchased in the TBS system (type of social housing). In the
last part of the discarded 10% of the transactions with the lowest price, and
10% of the transaction with the highest price transaction as outliers, leaving
14,620 transaction and.
3. ANALYSE OF THE MARKET
The
results of the transaction analysis for two types of real estate: single-family
houses and residential premises are presented in this section, both analyses
are divided into 5 types:
(1)
Data on the number of transactions in
Cracow in the analysed years (Figures 2 and 7).
(2)
The number of sales transactions in the
city, divided into quarters for each year. In connection with the analysis of
the number of transactions carried out in the given annual quarters,
transactions from individual months were first selected and compared with the
first three quarters of the analysed years. Later, all transactions from all
quarters in individual years were summed up and these numbers were compared
with each other (Figures 3 and 8).
(3)
Changes in the average transaction price
for single-family houses (Figure 4) and the average price per square meter of
housing (Figure 9). In the case of single-family houses, transactions in the
price range from PLN 400,000-2,000,000 were considered from the database. When
analysing apartments premises, apartments in the price range of
80,000-1,000,000 PLN were considered. In this way, the transaction prices were
similar, and all the individual analysed periods were reliable. The analysed
periods are the quarters of individual years.
(4)
Number of transactions in particular years
and districts (Figures 5 and 10) as presented for better interpretation on the
map of Cracow. The location in relation to the district on the map of Cracow was
determined based on the address. Using the data prepared in this way, an
analysis was carried out in relation to the number of transactions carried out
depending on the quarter of a given year and the district.
(5)
Statement of the number of transactions in
individual quarters for all years (Figures 6 and 11).
3.1. Single-family houses
Figure 2 shows how the number of transactions regarding single-family houses in the city has changed over the analysed years. In the year around in 2017 and 2018 the number of transactions concluded during the year does not differ significantly from each other. The difference between them is only 8 contracts. The year 2019 is also a similar number of transactions as in previous years. In 2020 there was a marked decrease in the number of transactions compared to 2018 or 2019. For example, in the year 2020 in Cracow reported only 64.6% of transactions in the year before, which can be explained primarily situation pandemic in the country.
Fig. 2. Number of transactions regarding the sale of
single-family houses
in Cracow in the analysed years for quarters I-III
Each
quarter years 2017-2019 noticeable and a similar number of transactions (Figure
3), only for the year 2020 the number of transactions in each quarter is the
smallest. The first quarter is characterized by a similar number of contracts
each year. The other two quarters is already a large difference between 2020,
and other years. The year 2019 is characterized by the highest sales in
values I and III. Quarter III is the smallest total number of transactions in
the years 2017-2020.
Fig. 3. The number of transactions for the sale of
single-family houses in Cracow,
broken down by years for each of the quarters
The
average transaction price in the city is highly diversified (Figure 4). It is
impossible to say that prices are rising or falling uniformly over the months.
2017 saw clear differences in transaction prices. From the fourth quarter of
2017, prices went up. In the second quarter of 2018 there was a slight drop in
prices, however, three months later, transaction prices were rising again, and
desired for the second quarter of 2019, when prices fell slightly again, to
then grow again. Another correction took place in the second quarter of 2020,
only to increase again in the next quarter. Price chart indicates the trend and
points to the fact that at the end of 2020 and in subsequent years, the
transaction price will grow. Shows that that the pandemic is not reflected in
the decline in the average price for a house family in Cracow.
Fig. 4. The average transaction price for the sale
of single-family houses
in Cracow in particular periods
Numbers
of transaction by year and city districts shows the Figure 5. In each year
Podgorze was characterized by the greatest number of transactions, and the
Downtown smallest ± which mainly results from the surface, number of
inhabitants and investment attractiveness. The year 2020 is distinguished by
the lowest total number of transactions in each district. The figure seen you,
that the initial months of the year 2020 showed a similar number of
transactions as the first months of previous years. In addition, in 2020, in
each district, after Q1, the number of transactions decreased gradually, where
Q3 this year indicated the lowest number of signed purchase contracts.
Fig. 5. Number of
transactions for the sale of single-family houses
in Cracow in each district for the analysed years.
Source: Skowron 2020
In given quarters, in specific years - excluding 2020 - the differences
between them are insignificant (Figure 6). In the year 2017 the largest number
of agreements were signed in and I quarter, and in the first quarter of the
third smallest. In 2018, purchase and sale transactions in the first quarter
were concluded in the highest number. The next year (2019) all reached the
quarter comparable figures s homes sold. It is worth mentioning that the
differences between the quarters in 2017-2019 are insignificant and reach a
level of several percent. Only the year 2020 indicates a large drop in sales of
single-family houses in the city after the first quarter.
The
COVID-19 virus could have contributed to a significant difference between the
number of transactions in the second and the first quarter of 2020. The country
announced the epidemic in March, i.e., at the end of the first quarter, hence
the sudden drop after the first quarter. Considering the tendency of sales
decline in 2020, the forecast for the last quarter predicts a lower number of
transactions than in the third quarter. So, the fourth quarter is unlikely to
exceed the fifty-transaction threshold.
Fig. 6. Number of transactions for the
sale of single-family houses
in Cracow each year and quarter
3.2. Apartments
The results
of individual analyses concerning residential premises are presented in a
similar way to the diagram of the analysis of single-family houses presented in
subsection 3.1. A constant increase in the sale of flats in particular
years is noticeable. However, 2020 shows a significantly reduced interest in
buying a home, as shown in Figure 7. The differences between 2017 and 2018, and
2018 and 2019, are around 400 transactions. The huge drop in the number of
transactions from 2019 to 2020 of exactly 44.8% is due to the impact of the
virus on the real estate market.
Fig. 7. The number of transactions related to the
sale of residential premises in Cracow
Comparing the
analysed years, a decrease in the number of transactions for each quarter in
2020 is clearly visible, only in Q1 this number (861) is like that of 2017
(932). The year 2019 is a noticeable difference in the number of concluded
contracts (between other years), where this year is characterized by the
highest number in each of the quarters. Quarter I have a total of 3,927
contracts, quarter II - 3,864 transactions, and quarter III - 4,524 concluded
contracts (the sum of the number of transactions in each quarter of each year).
The differences between Q1 and Q2 are 63 contracts, in Q1 and Q3 597 concluded
contracts and between Q2 and Q3 660 transactions. These discrepancies are in
the range of 0.5-5.4% in relation to the sum of all analysed transactions
(Figure 8).
Fig. 8. The number of
transactions concerning the sale of residential premises
in Cracow divided by quarters
After analysing the average transaction prices per square meter of a dwelling in the quarters of individual years, a constant increase in average prices was noticeable, which is shown by Figure 9. The source of the appeal cannot be found. In the years 2017-2020, there was once a decrease in the average prices of a square meter of a dwelling. It took place in the fourth quarter of 2017. The end of 2020 shows a slight but steady rise in average prices per square meter. This heralds that at the turn of 2020 and 2021, the value of a square meter in Cracow will increase.
Fig. 9. Average transaction
price for the sale of residential premises
in Cracow in individual periods
The tendency to buy flats in districts in the case of single-family
houses shows that Nowa Huta enjoys the least interest, and Podgorze - the
largest (Figure 10). As in the case of single-family houses, 2020 is
characterized by the lowest number of transactions during the year. Q1 in 2020
was characterized by a similar level of purchased residential premises every Q1
in previous years. The next two quarters of 2020 are a continuous decline in
the number of concluded contracts. The exception is Podgorze, where in 2020 the
number of transactions in Q3 is greater than in Q2 of the same year.
Fig. 10. Number of
transactions regarding the sale of apartments
in Cracow in each district for the analysed years.
Source: Skowron 2020
Each analysed year in the 2017-2019 period
shows a regular increase in the number of contracts concluded over the months.
However, this pattern does not apply to 2020, where the number of transactions
decreased over time (Figure 11). In the last analysed year, only the 1st
quarter showed a number with a slight difference compared to the 1st quarters
of the previous years.
After the first
quarter of 2020, restrictions in relation to the COVID-19 virus began to apply
in the country, which could have a significant impact on the situation related
to the purchase of apartments. Each year, the regularity of sales growth over
the months is noticeable. Only the year 2020 shows a regular decrease in the
number of signed contracts.
Fig. 11. Number of transactions related to the sale of residential premises
in Cracow each year and in a particular quarter
4. SUMMARY AND CONCLUSIONS
The aim of this
study was to analyse the impact of the COVID-19 coronavirus pandemic on the
number of purchase and sale transactions and prices of apartments and
single-family houses in Cracow. A pandemic broke out in 2020 and a pandemic
state was declared in late March of that year. Many restrictions concerning
social life and in the field of economy were introduced. At the end of the
year, a national quarantine was introduced, which still prevented and blocked
the development of many areas of culture, science, and economy. Due to delays
in submitting copies of notarial deeds by notaries to starosts, the data for
the fourth quarter was incomplete for 2020. Therefore, the analysis of the
number of transactions for 2017-2020 covered only the quarters 1-3. The
collected transaction database for Cracow included 22,164 transactions, and
after applying data filtration, the database decreased to 13,049 transactions
(58.9% of the initial number). This sum consisted of 12,045 housing
transactions and 1,004 single-family housing transactions. The filtration
process was three-stage and included: only purchase and sale agreements between
natural persons, only free market transactions and transactions concluded only
in I, II and III quarter of each year. The work includes analyses of the number
of transactions, average transaction prices (single-family buildings) and
average prices per square meter (residential premises). Based on the analysis,
the following conclusions were drawn:
- The beginning of
the national quarantine period in 2020 had a significant impact on the number
of purchase and sale transactions of apartments and residential buildings.
There was a significant drop in the number of contracts signed after the first
quarter of this year. The quarantine in the country was introduced in March, so
during the analysis, the key factor was the difference between the first and
second quarter of 2020. The difference between them was 48.9% for residential
premises and 36.9% for single-family houses. Only the first quarter of this
year was characterized by the number of transactions, which did not differ
significantly from the number of transactions in the remaining quarters of the
analysed years.
- The number of
transactions in 2020 was more than half lower than the number of transactions
concluded in the previous years analysed (2017-2019). An example may be 2020
comparable to 2018 on the residential premises market, where the number of
1,734 transactions is only about 51% of the transactions concluded in 2018.
This comparison on the single-family house market showed a difference equal to
64.6%.
- The analysis of the
number of transactions in individual quarters in 2017-2019 did not show any significant
changes between individual (subsequent) quarters for both databases. Thus, it
was shown for the analysed data that the season had no impact on the number of
transactions. The only exception is 2020, but it is related to the epidemic
situation in the country.
- The average
transaction price for a single-family house in Cracow over the analysed years
showed a slight upward trend, with small fluctuations between consecutive
quarters. 2017 saw an alternating shift between a sharp rise and a fall in
prices. 2018 is a year of slight fluctuations in average transaction prices.
From 2018 Q3, these prices were rising systematically until the beginning of
2020, where a further decline in prices was recorded. However, three months
later, prices were rising again. The COVID-19 virus may have had an impact on
the shaping of the transaction price chart, the drop in prices in 2020 could
have been caused by lower demand for real estate due to the uncertainty caused
by the pandemic. Later, when demand increased, prices may have gone up.
- The situation
related to the COVID-19 virus did not have a major impact on the changes in the
average price per square meter when it comes to residential premises, which is
visible in the constant upward trend in price in Q3 2020, since the beginning
of the analysed period, the price per m2 has been systematically grew every
quarter. Only in the first quarter of 2018, there was a single breakdown in the
trend line, however, the difference in price was small. The demand for
apartments in Cracow is not decreasing, which means that the pandemic has no
significant impact on the prices on the Cracow real estate market.
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Received 03.10.2021; accepted in
revised form 09.12.2021
Scientific Journal of Silesian University of Technology. Series
Transport is licensed under a Creative Commons Attribution 4.0
International License
[1] AGH University of Science and
Technology, Mickiewicza 30 Av, 30059 Cracow, Poland. Email: floorball.rafal97@gmail.com.
ORCID: https://orcid.org/0000-0003-1526-4255
[2] AGH University of Science and
Technology, Mickiewicza 30 Av, 30059 Cracow, Poland. Email: maciuk@agh.edu.pl.
ORCID: https://orcid.org/0000-0001-5514-8510