The Popularity of Single-Family Housing in Real Estate Development Activity in the Light of the Pandemic – the Case Study of Łódź

Abstract

Theoretical background: The functioning of the entire housing market and the sale of developer dwellings depends on many factors. They are, e.g. economic and financial, institutional, environmental, cultural, and religious. Due to the complexity of the real estate market and the variety of factors that influence its functioning, the real estate market is characterized by high variability. Some external factors, especially those difficult to predict, may cause rapid changes in the size of this market. Epidemics can be such a factor. Recently, the COVID-19 pandemic has significantly impacted the functioning of many housing markets. Since we spent whole days at home with whole families, it soon turned out that the previous places of residence needed to be bigger, functional, and properly located. Therefore, in many places worldwide, the demand for single-family houses has increased, contributing to the growing sale of such developer projects. The pandemic, however, has passed, but its effects, along with the consequences of the war in Ukraine, also affect the standard of living of the population and real estate development activity, although it seems to be in a different way. Purpose of the article: In connection with the above, two research objectives have been set in this article: to determine the impact of the pandemic on real estate development activity in the Polish housing market and to analyze, on the example of Łódź, whether the pandemic contributed to changes in developers’ offers and level of sale, especially in the context of single-family investments. Research methods: In order to achieve the set goals, the desk research method was used. First, based on statistical data of the Local Data Bank situation on the primary residential real estate market was analyzed (in Łodź). Then, the number of investments implemented in Łódź, broken down into multi-family and single-family housing, was examined (based on data collected by the author from real estate portals and websites of individual developers). Concerning single-family housing, investment commencement, and completion dates were identified and finally, based on the starting dates, single-family investments were divided according to the level of sale. Main findings: The outbreak of the COVID-19 pandemic has “turned on its head” housing markets in many parts of the world. Overnight, entire households switched to remote work or learning, which was difficult to reconcile, especially in small dwellings. Difficulties in functioning partly prompted and partly forced to look for other, more suitable places to live. Because of that, developer projects concerning single-family houses sold very well during the pandemic. However, it seems that the increase in popularity (sale) of single-family investments offered by developers was temporary. The increase in interest rates resulted in a decrease in demand for large dwellings, which few people can afford anymore, and they are not an attractive investment for investors. So, developers have frozen capital, which, unfortunately, with the loans taken out, may, in the long run, lead to the risk of debt growth and bankruptcy of smaller enterprises.