Real Estate /
Current state of the property market in Krakow [135]
A number of posts on this forum recently have painted a rosy picture of the Polish economy’s ability to be relatively immune from the worst effects of a global recession. It is, in my view, less exposed to the more immediate effects than most European economies. The up turn started later than in most countries and there has been a large pool of talented labour to fill the vacancies created by domestic expansion, international inward investment and EU investment in infrastructure etc. The GDP growth has been impressive and most of the forecasts for future growth appear to be a slow down but still with positive figures. All I would say is that such predictions are based upon the ‘normal’ reporting cycle for economic indicators, some of which are global in nature and those are changing almost daily in the light of the current worldwide conditions.
Just how ‘immune’ Poland will be to the worst effects of the global downturn is a question for the economists to answer. It requires knowledge of the importance of imports and exports to the Polish economy. These will be affected by exchange rate movements which are in turn affected by speculators and interest rate policies in the major markets. The pattern of interest rates does not seem clear to me yet. In the US the inter bank lending rates are now at 1% and forecast to go as low as 0.5% to get capital moving again. In the UK the position is less clear. Also I am not aware of just how much of Poland’s growth is fuelled by foreign investment. If it is significant then you have to assume that this will dry up as foreign companies rein in global investment in response to their overall performance. It would be interesting to know also the extent that Polish banks have participated in interbank lending and may therefore be indirectly exposed to the sub prime fiasco.
The impact on property prices is all affected by the overall economy. I guess there are additional factors around exchange rates where foreign currency mortgages have been taken out (is this significant in Poland?).
Personally I don’t know enough to predict the impacts on Poland. My own decision to get out of the property market in Poland and Latvia last year was driven by two main factors. Firstly it was inevitable that a global downturn was coming and secondly most of my purchases were between 2000 and 2001 so the returns were very good. Being naturally cautious I bailed out almost completely. There was, and still is a risk, that the property boom is unsustainable purely because the gap between earnings and property prices is too high.
On this thread we have two differing views, those of Ash and Boydie. I hope for their sake that Ash is right – but I wouldn’t bet my house on it!
