15 reasons why the Polish real estate market will crash soon

Prices dropped, in some cases, by as much as 50%.

Source: propertyarticles.com/overseas/20091012438.html

High demand in the real estate market in recent years had caused systematic price increases in both residential and commercial investment sites - until mid-2008.

The accumulation of sites which appeared in the market in 2008; the change of economic conditions and slow-down in the real estate market brought both a decrease in demand and prices. Depending on plot type and location prices dropped, in some cases, by as much as 50%.

The market is now characterised by a high prevalence of supply over demand. In recent years the supply of investment sites was small and the situation became worse after the cancelling of the majority of zoning plans. This limited supply of plots ready for investments, coupled with prosperity in the real estate market caused rapid price growth.

The dynamic development of the property sector in Poland encouraged companies acting in different branches, as well as foreign developers, into the Polish development sector. This occurred regardless of the cost of purchasing very expensive sites. In a result of financial crisis which emerged in the second half of 2008 and drop of demand and prices in real estate market, many of these firms are now saddled with land assets which threaten their financial liquidity.

polsky

#62
Prices dropped, in some cases, by as much as 50%.

Again, you are referring to the price of land/plots. What has this got to do with houses/flats, that are already built?......there is no indication that prices for property have dropped by 50%

The cost of labour and materials to build properties is not going to fall by 50%, this is just wishful thinking on your part.

True, the cost of materials is falling much much more than 50% ;)

Because building materials are very cheap, and they are collapsing even more down,
because the demand is very low.

Building materials cost down dramatically

Source:

washington.bizjournals.com/washington/stories/2009/02/16/focus1.html

Because contractors are starved for work and weak demand is pushing down prices of the commodities that create building materials, anybody with the cash and stomach to go forward with a building project may get the deal of a lifetime.

in Poland ?

stop clutching at straws. nothing gets cheaper in Poland... especially building supplies.

if there is no perceived crisis in Poland... why would they adjust prices.

this is your wishful thinking

apartments prices are collapsing, and maybe you will choose
to be the only to ignore even this:

[b]Continuous house price falls in Poland expected

After strong increases from 2004 to 2007, property prices in Poland either stagnated or declined in 2008. The decline continued in Q1 2009 and prices are expected to keep on falling until 2010, at the least.

globalpropertyguide.com/Europe/Poland

house prices always go up and down, but they never drop drastically.

my comment was, in the main, about building supplies.

Yes they do crash dramatically - look certain US states from 2006-08 (Florida, California) or Spain.

And there is no guarantee they will go up either - Japanese property is still cheaper than it was in 1988 so you can have 20 years of compound negative growth.

You cannot get away from the average wage and affordability equation in the long run. I reckon a 20% further fall over next 2 years. The modest rises shown this month are from tiny volumes of transactions.

Thats correct, people are mislead into believing that properties sold in sort after locations effect all properties in general, not the case...if you look at real estate sites some properties are on the market for years. you don't have to work out why. Poles are great optimist though, I'm now hearing that with a euro currency in Poland prices will jump 50% ..

I wouldn't actually be surprised. Those that are trying to attract rich western buyers are by far the worst - there was a rather hilarious example on here of someone trying to get nearly 4000PLN a month for a flat in a bad part of Poznan with communist-era furniture!

I've just seen a house advertised for 1.8 million zlote, the agent has given it a big song and dance but in real terms its not worth more than 600,000zl max. the more times agents put on the market these ridiculous price the more people believe house are worth that much. The motto real estate agents should have is bullsh/t baffles brains.

The industry is certainly about as professional as my little toe - I'm really not sure who they expect to actually buy half of these properties, given that Poles aren't going to be so stupid to trust them and foreign buyers just aren't buying.

One particular scourge here is the way that ones who boast about speaking English (and even the ones which have native English speakers working for them!) are absolutely disgraceful for trying to screw people. I did some research for my own business by going round pretending to be a buyer - and some of the rubbish they tried to sell me was absolutely incredible.

I don't think there'll be a collapse in all areas, but I can forsee many 'modern' developments crashing in price quite dramatically, just like what happened in the UK.

Sort after, blue ribbon areas will always maintain good value ie old town areas of Krakow, Gdansk and Warsaw, but some of the country areas, I just cannot believe what people are asking, that property I mentioned in my previous post for 1.8 million zlote, well you could buy 2 very good properties in the US for that price and command a good rental return, I just laugh when people tell me its a good investment. The bottom line is people who have money don't rent and people on a 2,500 zl per month cannot afford to go near that sort of place, further homes are not selling in Poland at the moment, I've been keeping a record of quite a few sites and the same homes appear and appear over and over again.

The real fall will be along the lines of minimum 40% in my opinion.

I read (and I can post it here) market of real estate analysis,
showing average prices on Krakow to be still
much HIGHER than Berlin, Hamburg and Munchen !!!

you may want to clarify this point please.

You have it in the market report written by

NBP:

" House Price Bubbles on the Major Polish Housing Markets "

;)

Prices in Poland are inflated, that's true. We are counting on the fact that flats in Warsaw near the city center will be in demand one way or another...

I'm sure someone for whatever reason will want to or have to move here, for work, or whatever. As for us, we are outta here...

Maybe the dreamers who still believe that maybe, hopefully, prices will not fall down
in Poland... will ignore also what the experts from NATIONAL BANK OF POLAND
write:

National Bank of Poland
Comparison of measures of bubble in the housing market of 6 major cities in Poland:

w w w .soc.cas.cz/download/871/paper_laszek_widlak_augustyniak_W04.pdf

National Bank of Poland warns about the " house price bubble " :

w w w .nbp.pl/homen.aspx?f=/en/publikacje/inne/bank_i_kredyt/2008_08/laszek. html

;)

SpecialPolak
nbp.pl/homen.aspx?f=/en/publikacje/inne/bank_i_kredyt/2008_08/laszek. html

Do you see the "2008/08" in this link!!!!! 15 months old!!! so where is the crash?
It was written at the height of the financial collapse, the same month as Leamen went bust!!!
What did you think a bank would write at that period of time?

Why do you bother posting this rubbish? Did you buy one of the expensive flats and get your fingers burnt?

Many forum members made a terrible loss in the Polish Real Estate market, no need to rub the salt in though, keep in mind if you take into account the exchange rate of the US dollar and zlote, property has gone down 25% not taking into consideration any other factors...

I think the crash has already happened I am looking at at an apartment that has dropped over 40.000 pounds in price, since the summer time.

Time to start buying I guess!

Unless you see something you really like, but I would still be waiting..remember the whole mafia associated with real estate in Poland will never admit prices of homes are dropping.

bolek

"Many forum members made a terrible loss in the Polish Real Estate market, no need to rub the salt in though, keep in mind if you take into account the exchange rate of the US dollar and zlote, property has gone down 25% not taking into consideration any other factors..."

I was not trying to "rub in the salt", merely trying to point out that this poster who uses about 8 different alias's on PF, seems to have a specific agenda for spouting inaccurate facts regarding the subject of property on this forum. I enjoy any discussion on this subject as I have been involved in construction/investing for 35 years, in Spain, the UK and Poland, which, I think qualifies me to contradict the posts of this person.

I bought my house here in Poland in 2005 and used a proffessional local surveyor to inspect the building and give me a "true" valuation in comparison to similar houses in the area. This service cost me 1000 PLN and saved me 20,000 PLN on the asking price. At the height of 2007 the value of the house rose substantially but this year if I sold, I would have to accept a lower price, but, it would still exceed what I paid. This is totally irrelivant as I bought the house to live in, not to make a profit.

Indeed, I took out a mortgage in CHF and last year watched my repayments rise by 20% a month, these have now settled down to what they were previously. Even with my experience, it is possible to get caught out at times, but waiting for changes in the markets caused by the hysteria of the media, is not an option if you need somewhere to live. If these so called experts could really fortell the rise and fall of prices, they would all be millionaires and have no need to work. If the banks were so clever at predicting the ups and downs of the property market, they would not have lost so much money investing in sub-prime mortgages.

All of life is a gamble, but you always need sustinance and somewhere to live. Would you not buy food for 2 months because the newspapers said the price will come down then?

As with all property purchases, use "common sense" and employ the services of a neautral "surveyor" to value and check the property out before you commit yourself to the biggest purchase you will make in your life.

End of sermon

interesting story. this forum need more stories like this, from real people, and their real adventures through the chaos that is polish real estate buying adventure.

how they avoided being ripped off, and so on.

these are true stories, like Avalon's story, and we need more of this and less unecessary fights

Thats only chicken feed, when you dealing with a million zlote property. Thanks for your response though, the other question you could ask is why the prices of houses in the US are cheaper than that of Poland and which also bring in a higher rental return?

bolek

"Thats only chicken feed, when you dealing with a million zlote property."

Yes, it is only chicken feed, but the property I was refering to was around a third of that price and for the 1000 PLN, I have never before seen such a comprehensive survey. It included pictures/plans of the property, charts showing prices that similar properties had sold for over the previous 2 years in the same area and it even valued each tree and shrub in the gardens, including a value per m2 of the lawned area. As a builder for 35 years in the UK, it took me 2 years in Poland to find a property that was built to my satisfaction. You would not believe the crap I had to look at before I found what I wanted.

I think that you will find that the prices you refer to in the US for the cheaper houses is probably because:-

a) They are built someway outside of the city centres where land is a lot cheaper but the road infastructure is good. Because of cheap fuel and cars, 100 miles to an American is "just down the road".

b) Unless you go for the more expensive property, the house will be constructed with timber frame and cladding which is nowhere near as solid or long lasting as those constructed in Europe. If you actually look at pictures of American suburban estates, they seem to be laid out more like an army barracks

c) All materials are mass produced, ie: walls (external/internal) and roof trusses. Roof coverings are usually shingle/felt which have a short life expectancy and need constant monitering. Houses are designed to use fitted, preproduced, segments which are always in production.

b) Most of the labour costs of construction are kept low by using cheap, Mexican labour. Not that they are not good tradesmen, they are simply paid a fraction of what a white american would get.

c)Costs of living are a lot lower in the US compared to the UK so construction workers are actually paid less than their British counterparts.

Its a similar story now in the UK with the Polish workers accepting much less than the British construction workers. When I closed down my company in the UK some 5 years ago, labourers (unskilled) wanted £12.00. per hour, bricklayers/plasterers £17.00 and carpenters (if you could find any) were looking for £25.00.and they all wanted to work a 6 hour day. I tried to employ some Polish workers in may of 2004 when Poland entered the EU, but, my English workers would not tolerate this as they knew that they would be "shown up" and would have to do a days work for a change.

You only have to refer to the regular newscasts for what happens to these houses in tornadoes and high winds, they flatten like pancakes as there is no real structural support.

At the end of the day, you get what you pay for.

I think that for anything you can find some explanations.

If the Poland population is decreasing with 2-4 millions of workers went abroad... you can still "create" demand saying that "the prices will rise because the building materials are more expensive"

Well the truth is completely different:

Experts: Expect More Price Cuts
Dave Snyder, executive vice president of corporate business development for Constructors & Associates in Dallas, says stabilizing materials prices are the rule of the day.

"Scrap metals prices are down 40 percent since July and still projected to go down, and concrete price increases will be a lot smaller," he says.

.siteselection.com/features/2009/jan/Building-Materials/

The only problem I can see with your post, is that you are refering to the US where prices are totally different to Poland. Cars and fuel are half the price and you do not have VAT at 22% on all goods. I believe you have a 6% sales tax. If you have ever been to Poland, you will notice that 95% of the houses/apartments were built during the communist era and therefore do not meet social and energy efficiency standards, most of the existing housing stock is dire and needs replacing even if 2-3 million Poles decide to emigrate.

Not everything revolves around what happens in the US, except financial fraud and wars.
The price of your building materials there are not really relevant to the people here in Poland.

Like your post, but Poland has adopted a US business style and practices. Most big companies are foreigned owned and its all for the shareholder ie more profit etc. There is a lot of corruption in all areas in Poland. I still don't know why homes are so expensive in Poland especially country areas. A lot of the older style building will have to be pulled down.

My God!! at last!!! somebody understands!!!!

m2 price/average income is a great indicator of a bubble. If people can't pay for their homes without dirt cheap credit, then the housing market would seem to be overvalued.

lets look for a random apartment on domiporta

so, you've got say a 47m2 apartment in wroclaw going for 319,000pln. That's fairly modest, not luxury, in a flat built in 1976 on the outskirts of town. With 20% down on a 20 year note, that gives us a monthly mortgage payment of around 1900pln a month on the low end. Mind you, that is with 70,000pln paid up front.

Gross average (not median) wages per month in Q3 09 is 3332/mo, which putting it into the calculator gives me 2064/mo net. Granted that's not household income,

It is difficult to see housing price increases to continue without real median wage increases. The numbers don't look sustainable. The problem with wage increases means that Poland will no longer look so hot for investments, inflation kicks in, etc.

The government is doing a great job keeping the zloty low and stimulating growth and FDI while controlling inflation.

If median wages do increase over a short period of time, we'll immediately have nice inflation kick in, followed by a loss of jobs as manufacturers take off, which will obviously affect property prices.

It seems to be happening in Slovakia at the moment after the adoption of the euro. Slovaks quickly found that they had way more purchasing power, but then they got bit by the exodus of manufacturing jobs. Official statistics say that housing prices have fallen in the last 3 quarters by 20%. That is a fairly hefty drop, especially considering that the days of cheap credit are quickly coming to an end.

I would expect the same to happen in Poland whenever the euro is adopted or the currency is revalued, and the national bank loses control of its monetary policy. The devalued PLN at first looks like a brilliant move by the bank against the "crisis". Only problem with that is that Poland has seen 1,5% growth, while purchasing power has dropped by 20%, seems like a net loss to me. Looks great in the short term, hopefully they will have an idea on how to get out of it without being too much of a burden on long term growth. Maybe sneak in a stronger zloty while the markets and investors aren't looking :)

domiporta.pl/details,191,109973740-mieszkanie-Wroc%B3aw-Aleja+Pracy.as p - reference apartment
calculateyournetsalary.com/ - salary calculator
stat.gov.pl/cps/rde/xbcr/gus/PUBL__ls_employment_wages_salaries_1half_ 2009.pdf - stats on polish wages

Gradual correction of overvaluation is not a bad thing. Weak speculators will be killed off for making unsound investments. People that bought their house based on using it to provide a roof over their head will feel some pain and continue to pay off their notes on their overpriced homes (which they can still afford, the monthly payments haven't changed after all) while putting them on the market to alleviate some of that pain, which in turn devalues the prices of homes even more until they reach their actual value. Speculators and home owners alike will try to get out of their properties, which will eventually be bought up again once the prices become reasonable.

A bit of disclosure, I rode the bubble until it started getting worrisome. I'll do it again if government steps in to prop up housing prices (drop those rates!). It's like welfare for speculators and builders, paid for by the sucker that is going to work every day paying his note on his overpriced house.