Current state of the property market in Krakow

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

Ash1972 – Using the numbers you provided and something called compounding you arrive at a 90% increase since the beginning of 2004. This qualifies as DOUBLING in my book.

Baseline Beginning of 2004 = 100%
92.5 close of 2004 (-7.5%)
118.4 close of 2005 (+28%)
157.5 close of 2006 (+33%)
181.2 close of 2007 (+15%)
190.1 close of 2008 (+5%)

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

100% growth = DOUBLING, my friend.

Well, the investors I work for have even tripled their investment, they have sold so this is in real terms.

300% growth = tripling.

It depends on where you buy.

why is your flat in the old Warsaw Ghetto area not doing well ash1972?

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.

Started 2003 and still active today.
I am not a real estate agent.

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?

There is no one rule, it all depends.
Also, It will get slightly more difficult to get a mortgage so holding on for rental return is an option.
2012, with the football and hopefully the Euro on the way should be a optimistic time.
The Zloty going down the last week (now going up) has scared the Poles and they are genuinely pushing for the Euro.
Also due to the rest of the world being in crises, the Poles abroad will come home and spend all their money.
As a woman commented om me,"you Irish are very cute, because we (Polish) are working in Ireland taking the money off you (Irish) and bringing it back to Poland, just so you (irish) can take it back off us again" She was joking but I know what it looks like.

The truth is Poland is still in need of good quality, finished houses. People are getting tired of flats with no gardens and a grey finish. And with all the roads being build, they can have a house and not be too far away from any centre.

I see that the reason Poland is not going to go down the tubes is because it has to come up more.

I don't know Warsaw, the Ghetto sounds historical, are they listed buildings? and what is in the area? offices, tourists, students, I think you know all this anyway.

The days of a quick buck are gone, it is the long term investments that will have more realistic returns, the market is becoming more stable and increasing.

his world crises is very good for poland, it means what happened in Ireland will nto ahppen here, which is fantastic for Poland.

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! :)

Well in fairness, most of the projects being done here are by Poles and the money gets reinvested into something else here as there are no opportunities in Ireland, so everyone's a winner.


I know what you mean, they have a tri-city so a twin capital country would not be out of place :)
Krakow used to be the third or forth biggest city 6 years ago. How quickly things change.


Yes, until they find Krakow ha ha ha,
I have been krakofied.
There is a (healthy) competition between Krakow and Warsaw, as there is between Cork and Dublin etc...


Are you concerned that it might revert back to a Ghetto :) I am of course just kidding.
Before you could buy off plan and make a pretty penny in a short space of time.
I would suggest letting out your premises to the offices, if it is of a high standard with receptionist it should be easy. But again I am not familur with Warsaw.

Everything I have done so far in Poland has been in Molopolska.
I have possibly missed certain opportunities in the rest of the country but really I do not mind as I am very happy here.
Although I drive through this country to Lithuania often and I see opportunities out that direction.

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!).

I must have missed seeing all the roads being built ! when I drive home it's still the same potholed cart-track thats always been there, but now with 4 times as many cars and the traffic lights still broken.

My prediction on property prices - 35% down over 2 years and no recovery within 5 years, it will start to bring it in line with earnings, but will still be unaffordable for most Poles. In ordinary circumstances it would fall more but bankrupt developers might mean less supply.

I also think you mortgage guys are going to struggle to make a living for the next 3-4 years, not just because of the market here but also because your client base have less cash. But good luck.

Yes, but have you been Wroclawified? originally many years ago Krakow was my favourite Polish city however after seeing Wroclaw there was no competition for me, I have met many investors who visit Krakow and Wroclaw on the same inspection visit and around 60% prefer Wroclaw.

In terms of new infrastructure Wroclaw recieves the lions share.

I have not seen Wroclaw yet.
I probably should, just to see, is it German architecture like Poznan?
Does it have mountains I can go snowboarding?


Yeah I hear great things about the major.

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?

Do you think that the Krakow city centre flats will keep their value? This was my reason for purchasing a small crappy one in preferance to a bigger, newer out of town one. It has been the case in London in past property crashes.

There are some small mountains not much higher than 1200 meters in the Sudetan range, youve also got Karpacz upto 1600 meters. For a half decent resort id reccomend the Czech Republic, its the Czech side opposite Karpacz the resort is known as Spindleruv Mlyn. Its better than Zakopane in my opinion.


There is a very real possibility that property prices will drop in Poland. I know of a Polish bank on the verge of collapse, and from experience I htink we can guess there will probably me more. Polish mortgage providers are extra cautious regarding mortgages at the moment its not so rosy as you may think. I hope im wrong..

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

I would like to Czech that out!

I am also going to go to Slovakia for skiing, it is cheaper i think? and they have 80% of the mountains.

When's the best time to see Wroclaw?

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Agreed

Sean - where you going in Slovakia. My boys escape long weekend away next year is thinking about slovakia. We've been to Chamonix/Argentiere for the last n years but is was very expensive last year and anyway Argentiere is getting too trendy for us old scruffs. We were thinking about Donovaly or Jasna.

I don't know, which is the longest ski slope in Slovakia (with lifts)?
I would like to spend a long time coming down.
I have not been skiing in Slovakia before, only here, Zakopane and Norway.

Haven't got a clue. When the chief researcher of our group has done his report I'll share it with you. To be honest our weekend is not a serious skiing event as the abilities are mxed. We tend to barge round the mountain in a large huddle knocking over kids' ski schools and old ladies and then have a few beers. Another reason for abandoning Argentiere really. Some of them found the skiing a bit tough. Not me of course. I found the Valle Blanche a piece of cake. (I wish)

Oops I'm off topic. No real opinion on whether it's a good time to buy property in Krakow. Apart from my old apartment in Warsaw I sold the rest of my 'portfiolio' to my business partner last year. my nerve ran out and the returns were good at that point.

Try Argentina. Now THAT will be value for money!

Ash, I have worked in CEE for 15 years and have a good grip on reality. I also bought two places here long before the boom (2001) and am quite happily avoiding buying anything else for the next 5 years.

US prices are due to pass the 35% fall mark in the next 6 months.

First, if prices can double in 2 years they can also halve in 2 years. That's what happens when bubble's burst.

Second, there is a credit squeeze here and if my own sector (chemicals) is anything to go by it is biting industries hard and (if you can read Polish, you will also see in all papers from Super Express to GW plenty of sob stories of individuals who have had credit withdrawn at the last minute).

Third, you overestimate the size of the Polish middle class. The place I work for has 1000 employees. Only 50 get more than PLN 5.000 per month and only 30 in my view could afford a flat above PLN 400.000.

Fourth - I never mentioned city centre appartments. I am talking about places within say 3-5 km of city centre. In the West an average paid worker could afford one. Here, on an average wage of PLN 3.400 you could not.

Fifth, the salaries do continue to go up, but they would need to increase at a rate of 12-15% per annum in order for flats to be considered affordable within 3-5 years. That rate of wage increase would make Poland uncompetitive and lead to unemployment, factory closures etc. It happened in Portugal in the late 90s and has already started to affect Czech and Hungary.

Sixth, the rent v buy equation does not make sense for either flats of houses. I pay 3.000 zlots rent for a fully furnished 180sqm house in a nice suburb. To buy would cost me lets say a million zlots - so I could rent for 27 years for the same price as the capital cost, forgetting all the extra interest payments.

I stick by my prediction but am quite willing to eat my hat, covered in a large dollop of Polish horseradish in Oct 2010 if I'm wrong.

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!

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!

Some good points there Ash. What is the earnings to property price ratio like in PL now or more importantly what is the earnings to mortage size ratio like? I guess at the heart of my question is just who is paying the prices being asked in the major cities now. How many of the buyers are foreign investors who might suddenly leave the market due to their own financial woes from nearer home. If they are the ones paying the current prices and their demand drops suddenly what happens to the domestic market. Stagnation, slow down or fall? Will the domestic market suffer from no first time buyers?

Like I say I have not seen any data so that is why I ma not making any predictions.

I cant belive someone is saying that property market in Krakow is still going up. All prices go 5-10% down.

Good discussion here.

I notice that most of you guys are focussing on capital appreciation rather than rental returns. Can I ask what type of rental yield is achievable on a standard property in Warsaw, Krakow or Poznan? My (Polish) GF owns a place in Poznan so am particularly interested in that city.

My opinion (based on my reading about other property booms) would be that unless rental yield is attractive then you are in bubble territory.

Any replies appreciated

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.