Investment and Consumption Demand and Short-Term Equilibrium in the Residential Development Market in Poland

Housing demand for newly constructed housing in Poland has observed some changes along the recent economic perturbations that were related to the Covid-19 pandemic and the Russian war on Ukraine, but despite significant changes in the mortgage interest rate, the market was rather stable. We propose an explanation for this phenomenon. The main forces are 1: relatively flexible supply of housing developers who sell pre-sale contracts, 2: large and experienced developer companies with a pool of construction permits, which can adjust their supply to the current demand and 3: owner occupier and investment demand for housing, which are complements at stable times, and times substitutes at turbulent. In Poland, investment demand is mainly financed by cash, so it is not so sensitive to interest rate shocks.