Interesting Article on Polish Real Estate

Today I stumbled upon a very interesting article: interfax.com/5/356632/news.aspx on Polish Real Estate from "Interfax Information Services". Below is one quote from the article:

"A recession in the United States will not affect the Polish real-estate market as negatively as it could hit other developed markets, such as those in the UK or Spain, Dorota Latkowska, head of Capital Markets and partner for international real estate agency Knight Frank, told Interfax Tuesday."

I also agree with most of this opinion due to the fact that Poland's Real Estate market is still in its infancy, and has much catching up to do with the West, price wise.

Maybe it will not affect as much, but I don't agree that "Poland's Real Estate market is still in its infancy". Does it mean that when it's in a mature age, the price per square meter would be three as much as in the US?

this is the 3rd time I disagreed with you today;(

But I wrote I don't agree with that statement so I guess we agree on that.

the Polish real estate market is overheated. if you compare prices in Berlin, with the salaries that Germans earn, then there is a huge discrepancy. Housing in Berlin is cheaper than in Warsaw. Also if the recession bites in the US and Western Europe, then all these employees working for Western firms in Poland will find there positions less secure. There are very few jobs in construction in Ireland now available for Poles.

Not only does that mean that many Poles may have to return to Poland, and will then compete for jobs with Polish who stayed in Poland.

on the plus side, unlike Bulgaria, local people have been able to afford property in Poland and the credit checks used to finance property deals in Poland are far more strictly controlled than in the UK. In the UK, it is enough to own a property to be able to secure a loan of up to 80% on that property with very scant regard as to whether you can afford to pay the money back, because if you default on your payments, the bank takes you house. whereas in Poland, you have to prove you can pay back a loan irrespective of how much collateral you have.

I am not sure if you can consider any country to be immune from global recession

No, it means when the real eastate market in Poland nears maturity, prices will be on a 'similar' level to that of Western European democracies and the USA. Who ever mentioned "3 times" as much?


It absolutely isn't.


Again, as in a previous post by someone making similar comparisons to yours, you cannot look only at local salaries anymore, because foreigners can work, buy and sell in most countries within the EU. My brother works in London and owns flats in both Berlin and Warsaw. From what he tells me, property in Berlin is certainly more expensive than it is in Warsaw. I also see this with my own eyes when comparing prices from any ad offereing similar property. Keep in mind, the EU is becoming more of a country in itself, with individual member countries functioning like states. Local salaries are having a smaller impact on properties these days. Hence, one doesn't have to work in Germany to purchase a property in Berlin.


Correct, no country is immune. When a country such as Poland who not long ago had property prices that were very undervalued, and whose economy is now booming, there is a very good chance that the worlwide recession will have little effect.

As the article mentions:

Strong economic foundations in Poland mean, however, that the
real-estate market is expected to continue to grow - albeit more slowly
in the near future.
"On the other hand, economic indicators in Poland are positive enough
and most projects have a potential to increase rents," Latkowska said.
"We still expect investment transactions on the Polish real-estate
market despite the fact that the next six months may be somewhat slower
in comparison to the previous year."

oh good grief Ela. Next you will be telling us that Krakow is undervalued. the moment that property becomes too expensive for local people to buy, you are in bubble country.

But we are talking about market, not about "social justice" or another BS.

the term 'overheated' is an economic term. I was not talking about social justice either.
Germans living in Berlin earn more that Poles but in some districts of Berlin housing is on a par or even cheaper than in Warsaw.

what is your opinion Grzegorz, I would be interested in hearing it?
Do you think the Polish housing market will escape a global recession unscathed or do you think prices might go down like everywhere else in the world?

in American the average cost of a house is six times the annual salary, in the UK it is nine times the average salary. Many economists believe that the prices in both these countries will fall for a long time as their housing markets are overheated and need to re-adjust to three times average salary as the prices were in the early 1990s.

this has nothing to do with social justice it has more to do with economics
The average price per metre in Krakow is 7500 PLN per metre, let's assume the average flat is 50 sq m. because it makes the calculation easier and then let's assume that the average salary is 2000 PLN per month. that means that flats in Krakow are 15 times the average salary. In Warsaw it is 18 times the average salary. Now before you get all excited I am aware that Warsaw is the capital and people earn more than the national average

prices in London would be around 12 to 15 times the average salary but they are coming down now. I own property in Poland and hope that Polish house prices will escape the recession intact but I doubt it somehow. In my case I bought property here many years ago and have benefitted from the price increases

Believe me if you want a slice of central London alot of buyers pay cash, and have no requirement of a mortgage, all the wealth and influenced by in London....that won't change recession or not. In China and the Far East, owing London property is seen as a status symbol.

The Polish market is driven by the creation of a new 'middle class', young hungry players, builders driving brand new sports cars etc etc......much the same that happened in England 20 yrs ago. People in Poland WANT, DEMAND, WILL PAY FOR IT.

In Romania people for average salary may buy X kg of sausage, in UK many more... I could go on forever...


But Germany has been in resession since years, their society is getting older - there is few young people...


If there is going to be serious global crisis then of course no but I doubt that It will happen. Many Poles think that this is some grand conspiracy but increase of prices is mostly natural - much bigger demand, higher salaries for construction workers etc.


Even oficially It's more than that + many people take cash under the tabel, many works abroad, so real average income is rather more like 3000 and there's many people (especially in big cities) making much more than that. Besides now people from "baby boom" (late 70's/early 80's) need flats and If a guy got married and his wife is pregnant he simply has to buy a flat - take 30-40 years MTG, beg relatives or something else but he simply need It no matter If It is really overpriced or not. Sure people who think that they can make the money forever just buying flats and selling them 6 months later are idiots but really "overheated" are only few small areas like Kraków old town, Wilanów etc.

Prices are coming down in practically every country which has participayed in the Global Housing bubble of the past decade and many are now heading into recession or worse - see Florida for an example of what can happen when things go really bad. As stated above, some of these countries are the places where Poles have emigrated to such as the UK and Ireland. I can confirm that the Irish economy has gone from growth of 7% and 5% last year to a projected figure of possibly 1% or even less for 2008. The reason is a collapse in the building trade. We will be in recession by the 4th quarter of this year.

As alligator says, the only real historic measure of house prices is Xtimes salary. If it costs up to 15 times salary for a flat in krakow, then you are in a bubble of epic proportions and throughout history bubbles always burst despite what industry people say.

No doubt much of the growth in Poland has been genuine economic growth over the past few years, plus there are other factors to consider in Poland such as the remittances from abroad and the young population but 15 times salary is a bubble IMO. Bubbles are irrational in their nature so its possible that it could continue for another couple of years. In Ireland it continued for about 5/6 years. However, the longer they continue the more severe the pain when they do eventually burst, as per whats currently in store for us over here.

thanks for the support Deise but I am afraid that the forum is frequented by people who believe that Poland is not affected by world economic factors. To even suggest that the price of real estate will not grow exponentially smacks of a lack of patriotism. Perhaps the laws of gravity to not apply here either.

Yes - its striking to read the exact same arguments being put forward by contributors here as I have listened to in Ireland over the past few years explaining why the growth is logical etc . "Ireland is different" was a favourite, along with the young population etc etc. Of course now prices are down by 20% across the board, those who listened to them and bought since 2004 are probably in or nearly in negative equity. IMO a healthy property market should come about as a result of a strong economy - not the other way around. We, in Ireland are in the process of discovering this the hard way at present.

Capitalism is a two way street folks - things do not necessarily continue to improve indefinitely. Recessions are not pretty but Im not sure that people from the former Eastern Bloc States really appreciate this to be the case.

That said I dont think Poland is as badly placed as Ireland or Spain (or possibly UK) at the moment. I dont believe that the lending practices of Polish banks have become as lax they have in western countries (at least I hope not) and this could save Poland from experiencing as sharp a downturn as us.

harbingers of doom are ten a penny on most property forums - anyone want to have a shot at what this will mean or offer advice to those who have invested in polish real estate...?

Hi Bubba - Im really only trying to gain a bit of perspective on the Polish market in the context of what would appear to be a global contraction in the availability of credit. My girlfriend owns a property in Poznan so Im certainly not hoping for a crash or anything like it but I believe the market is better served by a dose of realism rather than the wishful thinking which is evident in many quarters.

As I have said above, I dont believe that Poland has gone down the road of easy money to the same extent as elsewhere and may be spared the worst of it as a result. But its not just property which will be affected as it would appear that a global recession is about to hit and those who are over-leveraged across all aspects of the economy will be the ones who will suffer the most.

It just seems to be extremely difficult to find any reliable coment on the Polish economy outside of people who have an interest in talking things up and some of the comments on forums such as this tend to be nothing more than sales pitches.

hi Deise - my interest is in overseas investors who have bought off-plan on borrowed money with the intention of a quick resale once the property is complete.

i am wondering if these investors will now find that their properties have not gained in value as hoped (or worse, are not going to be completed or have dropped in value, as suggested in above posts) and their rental worth is insufficient to cover repayments on their loans back home.

Spot on - I get the impression that some of those involved in the Polish real estate business believe themselves to be very often dealing with rich investor-magnates when in reality, many of the overseas buyers are pretty ordinary guys who are leveraged up to there eyeballs.

Many of these guys have re-mortgaged at home to raise the capital to invest abroad. As you have pointed out, if their income is curtailed back home, as happens in a recession, its very likely that they will be forced to take a hit on their overseas investments.

I wouldnt be surprised to hear of Irish and Brits effectively "disappearing" and just walking away from their investment properties in Poland and elsewhere. Effectively an international version of what Americans call "jingle mail" whereby people just drop the keys in the letterboxes and leave.

I wonder could a Polish bank pursue somebody for non-payment of a mortgage if that person lives outside Poland?

Anyone care to comment on this or where they see the Polish market going in general? Have commentators over there begun to talk about the mythical "soft landing" yet?

don't they just reposess the property?

Yes but if it was a 100% mortgage and the value of the property has dropped, they're fecked.

what bank gives 100% mortgage then?

i think the majority of overseas investors will have raised finance at home and might find they need to make mortgage payments longer than anticipated - with obvious implications. as with this sort of situation elsewhere, there may well be rich pickings for the canny investor...

anyone else looking at american real estate?


more to the point - who takes a 100% mortgage?

Lots of them! I've even seen 110% mortgages offered (so as to cover the fees and costs incurred when buying a property).


People who can easily afford the repayments and don't want to wait to save a 10% deposit because property prices are rising faster than the interest rate offered by banks on savings accounts.

yup... until it all goes horribly wrong...

If you've got a 350,000zl 30 year mortgage, your repayments are pretty much what you'd be paying to rent anyway that property.

that's the bank's risk


that must be in the low-risk investements then. Banks know what they are doing , or don't they. That's is not the point.


only under that condition it make sense.


if you live in Warsaw. I guess it is better to pay the mortgage than the landlord, that if of course if you don't die before that period;). Sorry for my somber sense of humor but I am fond of short term loans in general.

yeah but are they? When people in the UK went into negative equity in the 1990s and the interest rates rose to 15% a lot of people posted their keys back to the building societies. however even today those people who defaulted on their mortgages are still paying the bank for property they do not own.

Now in all fairness I do not know what would happen if a foreigner defaulted on a Polish mortgage though. However banks are notorious for passing on costs so they would simply increase the cost of arranging mortgages and increase the mortgage rates so that the rest of borrowers pay to 'sponsor' the losses from people who default.

in simplistic language the 'responsible' borrowers pay to sponsor the 'irresponsible' borrowers

one of the things that I really like about Polish banks is that if you have property worth 200,000 Euros and you want to secure a loan of 50,000 Euros the bank asks you how you are going to make the repayments. if you cannot prove that you can make the repayment, there is no way you will get the loan. In the UK, if you want to secure a loan on the property you can do it over the phone and get an instant answer. OK you will have to fill in a few forms later but the loan is agreed in principle over the phone in a matter of minutes because the bank knows that if you default on the repayments, they take your house. then the bank can make additional revenue out of your misery/stupidity for charging you a fortune for putting your house up for auction to pay the outstanding debt.

this is one of the reasons that I believe Poland will not suffer like the UK or Ireland as the banks here have not been completely irresponsible. I do not believe there is a Polish self-declaration mortgage. this is basically a product where you are encouraged to lie your head off about your earnings and the bank does not verify your salary, you just pay a higher rate of interest instead. if you find one please let me know :-)

Having said that a lot of the Brits that bought in Poland are completely mortgaged up the wazoo in the UK and took out massive loans to pay their deposits to buy in Poland.

they will be amongst the first casualties if the market takes a dip. they might not suffer themselves if they default on their mortgages, however, Polish families will probably have to pick up the tab for them. Banks hate to lose money

my point was that many of the sub prime victims had been sold 100% mortages and look what a mess theyve gotten into


quite, but this comes down to borrowing sensibly.

the uk system you describe above allows for the sensible borrower to prosper more easily. i borrowed for my first property in this manner, without income, and it was a sensible investment - i have prospered.

sure, you can argue that its the bank being irresponsible for the ease at which they hand out loans... but at the end of the day... when all is said and done... the bottom line is that the burden of responsibility sits squarley on the shoulder of the borrower


lol - ill give you then number of my broker... provided youre a sensible borrower ;-)

You are right. At the end of the day it is their signature at the bottom of the contract, but there have been a lot of vulnerable people duped into getting into debt way above their heads. Dustmen who have declared £60,000 salaries because the mortgage broker told them that it was the only way they would get on the property ladder and because in the next breathe who told them that the price of property always goes up. that coupled with Property Porn with Sarah Beeney or some other soppy tart telling the viewers that any monkey can become a property millionaire you just need to borrow a shed load of money, install a new kitchen and paint the walls magnolia then you are laughing.

the reason for the credit crunch in the US is mainly due to mortgage brokers getting poor families (read black) to take out loans that they did not have a snowball in hells chance of being able to pay back. The broker takes his commission and he is away having made a fast buck.

The UK and US systems unfortunately allow for the raving lunatic to borrow just as easily as the sensible investor. Give us your broker's number, I am sensible, honest:-)

What are you talking about ? Most people here would love to see prices going down.


There is no "global market" in this case.