Spondeo interviews YIT: All about Polish housing with a Finnish twist

YIT, the largest Finnish construction company, has completed several new projects in Warsaw and Gdańsk in recent years. Spondeo asked Tomasz Konarski, the CEO at YIT in Poland, about the company’s expansion in Poland and current situation in the Polish real estate market.

Tuomas Asunmaa: How do you use your Finnish origins for local promotion? Do buyers value your background when making a decision to purchase?

Tomasz Konarski: In our communications with customers, we emphasize the company’s connection to Finland from the beginning. The philosophy from the north of Europe on developing urban space, taking into account both human and environmental needs – with the slogan “More life in sustainable cities” – corresponds to modern trends and needs. Our clients appreciate this, which is evident in the interest in our projects.

Finnish design is more than designing ordinary objects. It is a creative energy that balances the austerity of space with colorful and natural micro-scale. This is a way of life that values functionality, natural and unforced simplicity. Northern design is also a marriage of innovation and technology that is gaining increasing recognition in Poland as well.

TA: Have you brought any typical Finnish house inventions or standards to Poland? Are there plans for any saunas in apartments yet?

TK: Housing construction standards in Poland are different from in Finland (in Poland, we build in a more traditional way – cast in situ – while in Finland prefabrication is dominant). However, in our projects, we introduce proven solutions such as functional, spacious and illuminated rooms, natural materials and well-thought-out common areas and green spaces, developed in accordance with our proprietary “More Life in Yards” concept. These are characteristic of the Finnish style inherent in YIT developments around the world.

We adapted the idea of placing a sauna in a flat in our projects in Poland – Nordic Mokotów, located in Warsaw, is a good example. The bathrooms in the units were designed so that their residents could easily install a sauna in them. We are considering implementing this solution in our future investments.

TA: Do you usually hire Finnish or Polish architects to design your real estate in Poland?

TK: As a rule, investments in Poland are designed by Polish architects. For example, one of our current flagship Warsaw projects, Aroma Park, was designed entirely by the KAPS Architekci studio. The result is a unique housing development that alludes to the history of the plot on which it is located. The project, which combines the revitalization of the historic buildings of the former Henryk Bienenthal yeast factory and new spaces, is proof that Polish specialists are excellent at their craft and worth trusting.

An exception on the Polish market is our mixed-use project in Gdańsk – the Żurawie – where we invited Professor Rainer Mahlamäki, co-founder of one of Finland’s most recognizable architectural studios – Lahdelma & Mahlamäki Architects – to work with us. In Poland, he is known, among other things, for the award-winning design of Warsaw’s POLIN Museum of the History of Polish Jews. Mahlamäki designed the investment with the help of Polish teams from LATERGRUPA ARCHITEKCI and GCK. This cooperation resulted in a unique project with an industrial character, referring to shipbuilding halls, ships, sea and dunes, all blending perfectly with the architecture of the Młode Miasto district. Thanks to the success of this team, we are considering further interesting international collaborations in the future.

TA: Are you planning to expand to other cities in Poland?

TK: Yes, we have even already taken specific steps to enter more cities, in addition to Warsaw and Gdańsk. Kraków has now become our target, where YIT has acquired two pieces of land for more than 700 apartments. In addition, we are strengthening our presence where we have been active before: in Warsaw, we have enriched our portfolio with two locations for about 600 apartments and in Gdańsk with three locations for about 500 apartments. To sum up, our existing land bank has recently been enriched by more than 80,000 sqm PUM and 1,800 units.

Żurawie YIT project in Gdańsk

Source: YIT

TA: The number and total value of new mortgage applications fell by over 70% y/y in August 2022. How are the market conditions affecting YIT in Poland? Are you in a less affected segment?

TK: We are a company listed on the Helsinki Stock Exchange and investments in Finland account for more than half of our portfolio. This means the situation on that market also has a significant impact on investor sentiment, which ultimately translates into share price dynamics. In Poland, demand collapsed as a result of the introduction of drastic credit rating criteria. The consequences have not spared YIT either. We have seen a significant decline in customers relying on credit to purchase apartments, resulting in lower sales. Fortunately, we have several projects that are going well despite the worse results. Aside from the interest rate hikes, the biggest problem in Poland is the FSA’s recommendation from March 2022 adding 5% to the margin and to WIBOR. Today, in order to take out a loan, you have to meet the stress-test criteria of about 15 per cent interest rates per year. On the other hand, some of our investments, such as the Żurawie, are attracting customers who have excess cash and see buying real estate as an investment with a higher rate of return than a bank deposit.

TA: Is the situation in the real estate market in Poland very different from other countries you operate in?

TK: We operate in eight other countries: Finland, Sweden, Norway, Estonia, Lithuania, Latvia, the Czech Republic and Slovakia. It is clear that the real estate situation in various European countries differs in terms of a number of criteria – social, economic, legal and other, all affecting the conduct of business. However, some common features can be found. As I mentioned above, the biggest influence on YIT’s operations is the situation in Finland, so despite the autonomy in the local markets, there are various dependencies between the branches.

TA: What was the biggest concern about the Polish real estate market when you started your first project here? Does it still remain the main challenge?

TK: Beginnings are never easy. Nevertheless, entering Poland in 2015 was a natural step in line with YIT’s development strategy in Central and Eastern Europe. In the first months we faced, among other things, issues with brand recognition translating into demand, acquiring land for construction, project financing and difficulties related to the activities of foreign investors. With the growth of the company on the Polish market and changes in the country’s socioeconomic space, we encountered new challenges. They are an inherent part of doing business, not only in the development industry.

TA: Are there any major differences between local real estate markets in Warsaw and Gdańsk?

TK: Each regional market has different characteristics. Despite the many criteria that distinguish local markets, at YIT we offer apartments that suit the residents of both Warsaw and Gdańsk. We know their needs and we know that YIT’s properties meet all the requirements that guarantee an appropriate standard of living. So we are confident that they will also appeal to customers from other Polish cities.

TA: Poles still prefer to own their apartments instead of renting them. Do you think this trend could change in the long-term?

TK: Poles are still used to buying apartments. The local rental market is one of the least developed in the European Union, although this too is gradually changing. Despite the increasing difficulties Polish consumers are experiencing when trying to obtain a mortgage, they still consider it more profitable to buy than to rent. Owned apartments are still treated as a sure capital investment that can pay off in a relatively short time. Combined with rising rents for rental units, I don’t expect interest in renting apartments to increase significantly in the future, especially in the traditional version. However, an interesting alternative is the PRS sector, which is bringing a new quality to the rental market. In the next few years, it can be expected to develop further in Poland, which may influence people’s approach to buying an apartment.

TA: How do you predict the situation on the Polish real estate market will change over the next couple of years?

TK: Recent years have made us realize how difficult it is to predict the market situation. As recently as 2020, we were optimistic about the future, despite the prevailing pandemic. Today, reduced demand is taking its toll on developers’ performance. The current situation is also affecting the business decisions of institutional investors. In many cases, they are refinancing the properties they buy, and it is currently difficult to obtain adequate lending levels for rental buildings. Financing investments using their own capital means less return on investment. Even rent increases are not compensating for the reduction in refinancing levels. The future of the industry depends on many factors, so it’s hard to say definitively what might happen in the next few years. What is certain is that, as an international company benefiting from the experience of having a presence in many countries, we at YIT are prepared for the challenges ahead.

TA: Are there any trends in apartment building that are worth following, i.e. Investors buying the entire estates?

TK: One of the most interesting trends is the strongly developing PRS sector in Poland. The Polish branch of YIT already decided to invest in institutional leasing by partnering with Nordic investor NREP in 2021. As part of the agreement, we have sold and are involved in the construction of more than 1,000 residential units located in Warsaw. We are currently developing three of the four buildings and will be handing over the first two soon.I believe that the apartments offered by the companies are a good alternative to traditional apartment rentals, meeting the needs of the modern customer. As I mentioned earlier, this trend may become one of the leading ones on the Polish real estate market in the years to come.

Visit the website: www.yit.pl

Parkur Residence in Warsaw

Source: YIT

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