Global Housing Collapse Spreads East

Really good summary on the global situation:

iht.com/articles/2008/04/13/business/housing.php

With some props to Poland:
"That reality is spreading. Once-sizzling housing markets in Eastern Europe are cooling rapidly, as nervous West Europeans stop buying investment properties in Warsaw, Estonia and other former real estate Klondikes."

"Ireland has the most overvalued housing market in the developed world, according to the IMF. In its recent economic outlook, the fund calculated that prices are 30 percent higher than they should be, given Ireland's economic fundamentals."

I have been telling forum members for the last 2years that the Polish Real Estate is over priced and a correction will have to take place, can I make a few points, firstly the reason why the housing market in Poland will crash is mainly because of the low income of Polish workers and lack of money coming in from a depressed US economy. The situation is different in Ireland which I will not go into now.

Without a doubt homes in sort after areas (location, location, location) will hold there own as will commercial properties in sort after areas, ie shops.

Without causing a scare campaign some well known property developers are on the verge of bankruptcy, further I have heard some buildings build by these cowboy companies have developed structural damage as a result of faulty workmanship and will have to be demolished in the near future.

A lot of speculators will have burt there fingers in Polish Real Estate, the smart ones have cashed in and moved on to greener pastures, ie other eastern markets.

Lets make no mistake those who have speculated on Polish Real Estate must now be heading straight to the cupboard for another stiff drink.

Maybe you have but since then property prices have increased over 100%. If they drop 20% now it really doesn't matter.


Not really. I'm glad my money is in Polish property, not stocks and shares, pension funds that evaporate or any other of the alternatives.


Actually the smart one buy now in markets which are nervous. I'm not interested in a 5,000 Euro Albanian farm that goes up 100%. I'd prefer a 350,000 Euro Polish apartment that goes up 10% - makes 7x more cash.


Bad reporting - only a fraction of the real estate sold in Warsaw goes to foreign buyers - can't bundle Poland in with Estonia, Bulgaria, etc.

yes you have and most who know the market agreed with you citing the greed of locals for the over-inflated prices. they also said that there was still money to be made, which there is and was


absoltely - there is no denying that shody workmanship, unregulated and dodgy standards combined with cutting corners to make a quick buck has resulted in a lot of substandard developments in poland - much of this can be seen in some of the high profile developments which must be embarassing for some

There are still many great deals to be had,especially if you have some cash.There are many Polish speculators as opposed to investors that are desperate to flip for whatever reason and have only two or three months left before completion in a good location.If they do not complete then the developer will usually give them their deposit back and sell the property at a higher price .They might have had this deposit invested for 18 months and be looking for someone to pay them the initial deposit in cash plus for examples sake 70000zl in cash as profit.The property is then reasigned and the buyer applies for a mortgage in the normal way.Because they are desperate to sell you can offer them their initial deposit in cash plus 15000zl profit in cash because some profit is better than no profit at all ,and you walk away with a property based for examples sake on late 2006 prices.

The main problem for some investors is yet to come.Those investors that bought in the second half of 2007 in shite locations and developments and grossly overpaid for their units will find that when they are completing and applying for mortgages the valuation their lender puts on the property will mean that they have a serious shortfall to resolve I forgot to mention that i am only talking about new build off plan flats and apartments.

The world is heading for a slow down and to varying degrees all countries will be affected, some marginally some greatly. If you are only interested in short term gain from property investment then you could be in for a disappointment. However serious investors look more long term. Poland and other Central and Eastern European countries will continue to be a good investment in the medium to long term. I have read a lot of comments in this forum from people who just don't grasp the wider picture of what is and what will be happening, I think part of this is due to their lack of experience to a wider market and partly there are a number of "kill joys" who will never take a risk in anything in life but will sit on the side lines just waiting to heap doom and gloom on those who are prepared to take a risk.

I don't think the issue is with the lack of properties at a good price but rather overabundance of those. That's great for the buyers but not for the owners since they are now in underequity situation. They owe more than they paid for their properties, even after years of paying the mortgage.

I second eleanoroconner on this. Property markets are cyclical. Over the past 2 years all first – third tier cities in Poland have seen increases of 50 -100%. Proclamations of boom and bust are easy. Genius is in the timing.


Crash? Really. I’ll eat my shorts if we see that. A crash would be the result of a gross over-supply of housing units (ex. Ireland, Arizona, Spanish coasts), or a significant number of owners in negative equity that were unable to meet their mortgage payments (US Subprime – Detroit, Ohio, etc). The first instance clearly does not apply to Poland and the second instance is extremely unlikely as Polish lending standards are tight, very few owners are in negative equity positions, and strong wage growth should compensate for rate increases in PLN / EUR / CHF during this period.


Only 2% of Polish exports are to the US. US FDI is a component of the Polish economy, but not significant. What could be significant is the effect of a US slowdown in tempering the global commodities surge. My sentiment is that the biggest story in regards to the direction of the Polish property market over the next 36 months is the cost of building materials. The Tusk government has already suggested that they will need to start importing cement from China in order to utilize all of the billions of EU funds and to meet Euro 2012 obligations in infrastructure upgrades. Can you imagine being a small developer in Poland in 2 years times trying to get hold of concrete, or iron re-bar?


I suspect you are right, but scare campaigns are based on rumours and fear-mongering. Can you name these Developers?


There is probably some truth to that. Can you share the names any of these developments?


Indeed. If you take a broad look across the major Polish cities from 4/2007 – 4/2008 you will see a 5% drop in prices. From 4/2008 – 4/2009 I forecast flat prices. From 4/2009 – 4/2010 a few percentage points increase. During that period Poland will have seen 12-15% compounded inflation, IMHO. So a drop of 10 – 15% in inflation adjusted terms. This would be called a “correction”, not a “crash”


A win-win!

No doubt the next few years will be tough on the Polish property market, but good investing is about doing better than the mean. Do your homework, stick to the fundamentals and buy what is undervalued or what you can add value to. If you don’t believe in Poland in the mid to long-term, than get out now. Otherwise keep an eye on inflation, commodities, the zloty, GDP, FDI, wage growth, employment figures and invest accordingly.