Real Estate / Current state of the property market in Krakow [135]

Total mortgage lending in Poland is less than 10% of GDP as opposed to the UK's 100%. The UK is officially in recession yet economic growth in Poland is strongly positive. Even property in the UK is estimated to fall by about a third over the next couple of years - not 50%.

Inward migration into the larger Polish cities is high. Plus, Poles are returning home from the UK to avoid our recession. That goes for Ireland and other parts of W Europe too.

Do you really think prices falling by 50% in Poland has any connection with reality? For the lower quality/poorly located developments, there will be some price falls. For more desirable developments - not likely.

Real Estate / Current state of the property market in Krakow [135]

Did this incredibly reliable source tell you the name of the lender that's about to go into administration?

Real Estate / Current state of the property market in Krakow [135]

A few points before we get way off track:

1) Comparing Florida property to Polish city centre developments is clearly silly. A relevant comparison would be to Bulgarian ski resort or coastal property as the same factors apply: unlimited land for development, aggressive marketing to foreigners and no real local demand.

The big cities in Poland are experiencing population growth due to inward migration. Why inward migration? Because the cities are where the highly paid jobs are.

2) The fact that the average Pole can't afford a central Krakow development is neither here nor there. The average wage earning Brit hasn't a hope in hell of being able to buy a central London apartment. Downturn or not, prices in Manhattan aren't going to adjust to become affordable to the average Kentuckian.

3) True, property markets do move in roughly 10 year cycles, as we're seeing now in Ireland and the UK. Irish prices in particular went up a staggering 5 times in the 12 years up to 2007. But - 2008 is nowhere near the 10th year of the Polish growth cycle. In fact prices fell in 2004, and 2005 was the first post accession growth year. So the 10 year cycle principle doesn't really apply here.

4) Price increases are coming from healthy GDP growth (4-5 per cent) and not solely easing credit like the last 3 years of the UK's boom. Even the weakest of the new EU member states, Hungary, is nowhere near recession.

5) The market for off plan Polish property is, and always has been, 90% Polish. Compare that to coastal Bulgarian property where the market was basically 100% foreign.

Real Estate / Current state of the property market in Krakow [135]

Blue Enigma, the levelling out we're seeing now is perfectly in line with a primary city moving from the first to the second major growth phase. There's usually a lull in between. If you look at Prague and Bratislava, both of which are a couple of years ahead on the curve and now well into their second growth spurt, you'll see the basis for the argument. Although I think this paradigm only applies to (de facto) capitals as you need the sustained inward migration.

My personal view is that neither Warsaw (where I own a couple of apartments) nor Krakow will do very much for a year or so, and then we'll start seeing some good growth again, say 10-15%.

Yes, year 5/6 of the cycle is probably right for both W and K.

Real Estate / Current state of the property market in Krakow [135]

That's right, prices so far have not even doubled since EU accession.

Real Estate / Current state of the property market in Krakow [135]

What about the first year (2004) of falling prices? Plus the earlier falls in 2001-2 (before joining the EU admittedly)

Real Estate / Current state of the property market in Krakow [135]

All good points Eleanor.

If agents put a price on a property and also get commission when it's sold they are motivated to put a realistic price on it - otherwise, no commission. At the moment agents in London will only do business with sellers who will price realistically, i.e. LOW

Real Estate / Current state of the property market in Krakow [135]


The lower quality, poorly located developments will probably fall by about that much. The upper end properties were never aimed at people who'd be stumped by having to find a hefty deposit!

Real Estate / Current state of the property market in Krakow [135]

Dat: the 'listing high to get clients' obsession only prevails during a roaring bull market. That's because the agents know they can shift anything and want the kudos of being able to get the best prices for their clients.

When the market is slower agents really need to do deals to survive; the commission will probably just cover costs and they haven't got time to waste with unrealistic sellers.

Deise07: even the risk free rate (money on deposit) normally gives you a spread over inflation so I'd be very surprised indeed if any other asset class actually gave you the inflation rate long term! There are some oddities in the world, true: Japan has been declining long term and property in Germany basically does nothing as Germany is not a home-owning culture (that's fundamental).

The fact remains that mortgage lending in Poland is minute compared to the West and Polish banks have been among the most conservative in the world, following the lead of responsible central bank policy. Add to this: strong economic growth, strong inward migration to cities and a clear undersupply of QUALITY properties.

Real Estate / Current state of the property market in Krakow [135]

Average real estate price increases for Poland:

2004: -5 to -10%
2005: 28%
2006: 33%
2007: 15%
2008: 5% (est.)

I cannot see how these growth rates imply average prices DOUBLING between the start of 2004 and now.

Real Estate / Current state of the property market in Krakow [135]

No I'm talking about average growth rates for the whole of Poland

Real Estate / Current state of the property market in Krakow [135]

Yes, 85 to 90%. Ergo, PRICES HAVE NOT EVEN DOUBLED.

100% growth = DOUBLING, my friend.

Real Estate / Current state of the property market in Krakow [135]

300% growth is in fact quadrupling! Well done, BUT those guys must have got in pretty early - say 2000?

My flat in the Warsaw ghetto area (Platinum phase 1) was bought in Oct 2006. Not a bad time to buy particularly - if only if it had been start of '06!

It completes in Sep 2009 but I was actually planning on selling earlier to pay the 90% that I owe to Budimex for a flat in their Murano development (nr. Warsaw Old Town). In the long run I don't mind holding onto both though.

Real Estate / Current state of the property market in Krakow [135]

Early birds and all that.. :)

By the way do you recommend holding onto developments until completion? Do you tend to get the biggest price jump at that point?

Real Estate / Current state of the property market in Krakow [135]

So the Irish have the last laugh! It often happens :)

Yes I pretty much agree with what you say. Warsaw essentially lagged behind Krakow for a couple of years and then really took off. I missed the really fat growth but I believe got some fairly decent dregs. Both have similar dynamics and Poland seems to be almost a twin capital country. It looks like Warsaw will ultimately dominate but it seems job creation is roughly equal in both cities at the moment - possibly with a slight bias towards Warsaw.

The Warsaw ghetto was I'm sure pretty historic before 1945 but like most of the rest of the city was totally flattened in the war! That's really the point, whereas Krakow is beautiful, Warsaw is very modern (ugly if you're being unkind) and the centre looks and feels somewhat like a Manhattan wannabe. Still, it's the capital, and for that reason alone foreign companies will want their headquarters there.

The ghetto area / Grzybowska St is growing into the new banking and financial district. Looks like the growth may need to take a breather at the present moment! :)

Real Estate / Current state of the property market in Krakow [135]

Is Lithuania in the same position as Latvia and Estonia, i.e. prices falling rapidly? I know Vilnius very well, but not for property (I used to have a girlfriend who lived there!).

Real Estate / Is it now the time to buy a flat in Warsaw? [10]

How much longer would you say, Poznan Kasia?

Real Estate / Current state of the property market in Krakow [135]

Boydie, you need to get some kind of grip on reality. 35% down? That's what's predicted for the UK over 2 years, based on a total breakdown of trust among banks due to subprime toxic waste.

Polish banks neither need or want to stop lending. There will be some legislation from 1st Jan 09 restricting large multiple/no deposit/foreign ccy lending but this will hardly affect the middle to upper middle classes who will buy the better properties.

There's no country in the world where the smartest city centre apartments are anywhere near affordable for the average citizen. Poland is no exception.

Polish salaries continue to go up (GDP growth is > 4%) and the cities are growing larger. Exactly what is going to tip Poland over the edge?

Real Estate / Current state of the property market in Krakow [135]


If you've bought in a good location and development then prices should hold well. Poles are getting fussier about what they buy but I don't think they have any less to spend

Real Estate / Is it now the time to buy a flat in Warsaw? [10]

Actually I own 2 (off plan) flats in Warsaw, the first 90% paid for, the second with 90% owing. I was toying with the idea of selling the first one (while still offplan) to pay the balance on the second - which would remove any need for a mortgage.

Although frankly I wouldn't mind holding onto both long term. The return will be decent but not fantastic.

Real Estate / Is it now the time to buy a flat in Warsaw? [10]

Yes. To be precise it depends on the terms of the contract. Normally for 10/90 repayment structures you cannot sell early unless you settle in full first or pay a penalty. For schemes where you make regular payments - for example 15%, 20%, 30%, 30%, 5% you can generally flip at any time (after the first payment).

But my feeling was you'd always achieve the best price after completion. As you said earlier, there are no hard and fast rules.

Real Estate / Current state of the property market in Krakow [135]


Try Argentina. Now THAT will be value for money!

Real Estate / Current state of the property market in Krakow [135]

The simple fact is 'affordability' is a total non concept. Property in Germany is priced way below what people can really afford because no one gives a damn for home ownership there and transaction taxes are enormous.

What causes a crash is a fairly sudden change in people's ability to pay a mortgage. For example, unemployment, or as we're seeing in the West, a credit squeeze.

Polish banks becoming more cautious in their lending policy and weeding out the no hopers does not constitute a credit squeeze. Other than that - can you see 4% growth turning into -1% any time soon? With Poland's largely domestic economic growth and EU spending signed and sealed?

Guys - if you made your money from 2000-2005 then true, you've got nothing to worry about. But people don't stop needing places to live in just because the boom is over!

Real Estate / Current state of the property market in Krakow [135]

Deise, during the peak phase of booms rental yields tend to be particularly low as everyone is struggling to buy as quickly as possible and rents only as a last resort. When prices stabilise or retrace a little, rents have a chance to catch up.

Real Estate / Current state of the property market in Krakow [135]

Is Polish unemployment increasing? No, it's still decreasing, and growth is both positive and strong. Just because Britain and America are about to enter a recession triggered by a banking liquidity crisis, it doesn't mean Poland is.

Can you point to any weakness whatsoever in Poland's fundamentals? Furthermore, its economic growth is almost entirely domestically driven (for the time being).

Luckily most Polish developments are NOT bought by British investors.

Real Estate / Current state of the property market in Krakow [135]

What are the GDP figures you've got? BTW this is interesting:

gospodarka.gazeta.pl/gospodarka/1,54642,5881063,EC_expects_3_8_ percent_GDP_growth_for_Poland_in_2009.html

Real Estate / Current state of the property market in Krakow [135]

Boydie

So what if the Zloty has fallen 20%? You're forgetting it has spent the last 4 years appreciating some 80%. This retracement will aid competitiveness.

Germany may be entering recession but her spending commitments in Poland (through the EU) are signed and sealed.

Rental yields? The fattest and juciest are, as ever, in Berlin. Try buying there and see how well your capital grows.

If you think you can double your money now in the Polish property market, yes, you've made a mistake. If you think your Polish portfolio will outperform property anywhere else AND be relatively stable, you're pretty much correct. It's definitely a long term play now. Where do you think prices will be in 2012? Higher or lower than now?

The only 'mistake' is to be in property at all AT THE MOMENT, that is, anywhere in the world. Getting out of a very strong market that temporarily has the jitters makes no sense.

Real Estate / Current state of the property market in Krakow [135]

That sounds a little high. I thought it was around 5%.

At least the EU thinks things look OK for Poland:

gospodarka.gazeta.pl/gospodarka/1,54641,5902201,An_island_of_relative_calm.html

Real Estate / Current state of the property market in Krakow [135]

Hi Ozdan,

The point is that long term both China and Poland are going to be way ahead of where they are now. Investors are simply panicking at the moment.

Poland is a strong market as real estate purchases are 90% domestically driven. What might stall plans along the way is the issue of unemployment - that will be the killer as that will physically prevent people from buying the properties they want to live in, investment choices aside.

Yes the point about Berlin was that yields are great simply because Germany is a non home owning culture. Yield and capital growth markets are different kettles of fish.

Real Estate / Current state of the property market in Krakow [135]

What will be a factor is the quality of the property you have bought. Prices will be resilient for upper end developments as the target market was never the mortgage desperados but rather those who already had large deposits and good salaries.

Let's not forget that Ireland now has a problem with recession and unemployment. Its EU funded growth spurt is ancient history.