Current state of the property market in Krakow

Ive drove past 'Macro' in Krakow almost everyday for the past five weeks. Everyday I have guys at the junction knocking on the window offering me flyers about a development of 8 resonably priced houses just outside Krakow. That seems desperate to me, and certainly not a sign of a healthy housing sector.

I agree.Besides it is a World Recession coming so Real Estate is hit first and I don't see how Poland would be different than the rest of the world.

The worst is to come in a few months our economists predict.

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.

It isn't.

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

Yes I can point to some specific weaknesses in Poland's fundamentals, here are three off the top of my head

- currency has dropped by 20%
- main customer (Germany) is about to enter recession
- budget deficit at a level where Euro entry will be difficult / impossible.

This is just the start. Rental yields are poor and if you think affordability is not important then whatever business you are in, you are due a nasty shock.

In any case, most of you boys seem to be trying to convince yourself that you have not made a mistake - those of us with longer experience in this part of the world are more sceptical.

What's so interesting ? This is uber optimistic scenerio and anyway +3.8% is pathetic.

In today's global crisis, a 3.8% GDP growth wouldn't be that bad at all. Hardly pathetic Greg

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.

But like I said, that's a very optimistic scenario (some expect even less than 2%) and Poland is not Germany or UK, here we need at least 5% to really move forward.


I agree that fluctuations on the currency market aren't that bad in this case but looks like you believe that "EU funds" make miracles, when netto these alms from EU have secend rate importance... Polish economy is generally based on export to Euro zone and when the growth over there is around 0% then you must forget about anything even close to strong growth here. And If things get really bad, their "commitments" will be worth nothing.

Then OK, u have qualified ur statement, fair enough

Property rentals in the larger cities are booming, 7-8% on residential property is easily achievable and 10% + on commercial is not unheard of and Im taking current property prices into considertaion.

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

Hi Ash1972,

I think what boydie might be getting at with the zloty dropping in value is that it is a fair indication of market sentiment towards polands economy as far as the rest of the world is concerned. We are experiencing the same here in australia.. Comodity prices drop and chinas future growth is questioned (australia has a heavy dependance on china for its exports of natural resources).. and you see the value of our dollar drop as investors start to view us as a higher risk.

In terms of Berlin vs Krakow with regards to real estate i think you are talking about apples and oranges. Germany has a completely different attitude towards housing.

This said.. i do agree.. theres no point in getting out of a soft market if u are already in it.. unless you think things are going to be worse than forecast..

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.

As they were in Ireland and in most countries pre bubble burst . . . although admitedly I think Polands fall will be softer

It will become more difficult for Polish people to get mortgages, it will no longer be possible to get 100 or 110% for people who can not afford it.

I am happy about this because it just means people will not get too much of a mortgage.
Poland has come a long way in the last 6 years (since I first arrived).
Poland will be effected by the current world problems but not much.


Ireland's property market is a joke, you know yourself.
People who could not afford it getting second mortgages etc etc, you probably know more than me.
Poland is not going to go the same way as Ireland.

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.

Exactly Ozdan, challenged to name specific problems with Poland's fundamentals, I did so. Interestingly if Poland was considered a better bet than say Czech or Hungary then the zloty would have strengthened against the czk and huf. It has not.

I can agree that lower German real estate prices are partly caused by less of a home owning culture (this is relatively recent and is understandable, when most families can remember their home being either bombed down or repossessed by commies). But other important factors are the requirement for a 33% deposit and the fact that there was already a good housing stock built in the 60s and 70s so much less of a supply problem.

As mentioned before, one issue with high end developments is that they are unaffordable for most Poles and in fact 95% of the population would be what you call "mortgage desperadoes".

Err.. what does an exchange rate - a market price - have to do with fundamentals? Fundamental statistics are calculated from data outside the market, such as umemployment, GDP growth or FDI.


No argument there. I just don't think Germany is much of an investment in terms of real estate.


High end flats in central London are unaffordable for 99% of Brits, mortgage or not. True, they're falling in price now. Why? Because the investment banks that paid big bonuses for so long are now broke. My approach is, and always has been, to concentrate on the properties that the top couple of % would be interested in. Their wealth is more robust - but by no means unassailable. Yes, richer Poles losing their jobs would cause serious problems. My guess is that the poorer ones will lose theirs first thanks to decisions made by the richer ones :-)

A joke indeed, and everyone else knew the punchline a long time before most of the Irish did. The days of every Joe Normal owning investment properties are long gone, and good riddance to them . . sanity will slowly return to the housing sectors everywhere, house prices will reflect their true value and I wont have to listen to every muppet at a party discussing how their house in Marbella is worth :D


So does the rest of the world, some more than others, Poland is far from immune from it either and will experience more than most expect pretty soon. When all the Poles here and elsewhere return home due to the recession, expect Poland to have a massive unemployment problem. Once Obama penalises American multinationals for redirecting tax and labor abroad, expect mass scaling down of out sourcing in countries like Poland. As for Irelands EU funded growth, the EU if anything hampered our economic growth and had little or nothing to do with it. Low taxation, education, location, american investment, language, credit, and the construction sector were the driving forces behind our 10 /15 yr growth spurt.

Tell me, would Ireland have achieved all of this had it been OUTSIDE the EU? Probably not. The point is, once inside, Ireland's super low corporation tax rate made it an obvious location for foreign companies' European HQs. Poland is following a similar (though not identical) route with big personal tax cuts from Jan 2009.

Polish economic growth is not dependent on winning outsourcing contracts from the US. In fact the only thing wrong with Poland's economy is what's wrong with the rest of the world. The extent to which Poland really is insulated from this will be tested over the next 2 years.

The growth of Poland's major cities is driven by inward migration. Migrants returning home is a detail. And besides, they'll probably make sure they have a job in Poland first before giving up that waitressing/cleaning/nannying gig in London..

My previous question wasn't rhetorical: Do you think Polish property prices in 2012 will be higher or lower than they are now?

Is there a country or has there ever been a country where high end developments were affordable to 95% of the population or even 50%?
Were there high end developments during communism? I don't know.
High end developments are for a small minority.


I really and truly hope so.
Some people thought they were millionaires, a good reality check was in order for a long time, it kept going up and up and up. Unfortunately it lasted this long.

I have lived out of the country for years and have only heard things from my visits.

But Poland is not like Ireland in many respects, it is not a crazy circus here. Actually I think for a good financial climate over here, a slowing down in the market is what Poland needs.


It would be a tremendous help.

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As for migrant workers, until they can earn the equivalent here as they can earn there, they won't be coming home (for the majority).

Yes there will be more unemployment in Ireland and Britain.
But there is a myth that the Irish or British will "look after their own" and sack the foreigners first. (from my own experience)

It is economics not patriotism.
Would you not agree?

The exact opposite is true. British employers prefer East Europeans as they have more of a work ethic and deliver much better value for money. Employers don't pay them less; they just get better results for the same outlay.

Three cheers for free labour. And sucks to socialism.

I totally agree.
The Poles and Baltic workers have earned a reputation for honesty and hard work that puts there UK workmates to shame.
Especially the under 25's.

It always disturbs me to see Polish University graduates doing non-skilled work. They deserve so much more.

Sorry to contradict this optimism but according to this article from the Warsaw Business Journal , Unemployment IS increasing in Poland like everywhere nowadays.

wbj.pl/article-43217-corporations-increasingly-announce-mass-redundancies.html?type=

Yields on commercials are now like 6% average. Yields on residential properties I would say are like 2-3% (I dont know who is still buying to let ;-))

Lwowska, is this the first time Polish companies have made people redundant? I don't think so. The long term trend is clear:

indexmundi.com/poland/unemployment_rate.html

Obviously, Poland is going to have higher unemployment in 2009 than 2008. It's not never never land.


People who can get low offers accepted by the developers, that's who.

It all depends when you bought and at what price! I'm expecting around 4% on my 2 properties and I'm less than 50% leveraged.

Thats impossible to say, but why wouldnt it have achieved this growth OUTSIDE the EU ? Being in the EU had little or no consequence to our economic growth, we were one of the poorest countries in Europe for most of our membership and our new economic success has nothing to do with being in the EU. What do you mean 'once inside' ? We were the ones who broke away from the european taxation norm against their wishes. One of the reasons we rejected the lisbon treaty recently was also because we dont want EU interference in our taxation laws. The point is that Irelands low taxation rate has been challenged consistently by the EU who see it as very unfair to the other member states and want a unilateral taxation system throughout the EU. If it wasnt for one of our own at the helm there, it would have been gone years ago and its a constant fight to keep it in place. Its no secret either that Poland is copying Irelands role model but it can never be as successful as that train has passed to much of an extent.

Considering Germany is now head over heels in a recession, the plunging stock market and the weakening of the Polish currency I suspect its very naive to think Poland will be sheltered from the recession. The ironic thing is that if Poland were already in the euro, that would have sheltered them a little . The average mortgage has gone up about 1 fifth which is relatively a lot, and it isnt any secret that many poles have mortgages out in other currencies which leads them scaringly exposed to the markets swings and roundabouts.

Outsourcing is massively important to Poland, and the Polish goverments template is to prioritise its outsourcing potential (thus why they want to copy Ireland) Emerging market countries such as Poland are hardly a homogenous group, but they face similar challenges to us all and will shake, even if it isnt as apparent yet. The inevitable outflows of investor capital driving down your stock markets and pressuring your currencies even more is occurring just as the demand abroad for your outsourcing and exports, has begun to weaken in countries such as germany etc. Coincidently you also mentioned earlier that germanys downturn wont adversely affect Germanys economy as they have already agreed contracts with germany that will shield you from any problems there, Im intrigued ???? Tell me more about this please.

Migrants returning home are going to be a huge burden on Polands economy, most economists anticipate a huge increase in unemployment over the coming years and its not the "waitressing/cleaning/nannying" ones I speak of, but the millions of polish employed in the construction industries that have collapsed. In Ireland the charity soup kitchens and homeless shelters are bursting with Polish construction workers and trades men who have lost their jobs. Most will return home soon as possible, the Irish goverment has agreed to help them with flights home etc (well its not Irish tax payers choice, nanny EU makes them). Not to mention the waitresses who are out of jobs because people arent eating out as much anymore and their employers inevitably have to shut up shop, restaurants are closing, the cleaners in the hotels are getting let off because bookings are down 30% / 50%....these people are going home, they have no other option, home to Poland . . . I doubt they will be worried about gaining employment first, or even if they will be successful in doing so. Of all the Polish in Ireland, it is estimated that about 60 % of what is left here will be in Poland next year.


Polish unemployment was 20% in 2003 before they joined the EU and were able to seek work abroad. I suspect it will rise to in or around 10% within the next 2/3 yrs, its virtually impossible to predict after that but I would guess it will follow expected trends, upwards.


True, and I think this optimisim shared by many poles isnt a true reflection of the reality of what is occuring


Couldnt agree more, the poles in ireland have trmendous respect for their work ethic and honesty in general

Congrats on reasonable assmptions and leverage. But still people are buying and counting on 8-10% yields because "someone told them".