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Poland's apartment prices continue to fall


Avalon 4 | 1,068
9 Aug 2011  #181
I did.
I would say a fall is of 15% per year would constitute a crash, but thats something you dispute.

What would you call -15% per year? steady? stable? gentle decline?

SeanBM took the time to show us a table of the median house price changes between 2008-2011 (post #117) in certain areas of Poland. Please explain to us where the falls of 15% per year are shown ? I cannot see a 45% disparancy so perhaps you can enlighten me.
OP peterweg 36 | 2,316
9 Aug 2011  #182
the time to show us a table of the median house price changes

Look at the first post on this thread. Now tell me why I should believe his selection of prices against the original article? In fact Sean ignores this chart,

Price changes

from the same article, showing a around 15% fall since 2007.Compound 4% inflation for four years, plus 15% gives a real fall of 28%. Not a crash, no sir. 28% fall is just rinky-dinky perfect.
Avalon 4 | 1,068
9 Aug 2011  #183
Compound 4% inflation for four years, plus 15% gives a real fall of 28%.

You have me wondering now how many people on this forum include inflation when counting any assets they own? or maybe they count next years interest on what they have in the bank as of this moment? Depreciation on a car I can understand but "inflation"? When I plan a project which may last for a period of two or three years, I do not include for the possibility that there may or may not be an inflationary period in this time. How could I base a business plan on what may not happen?. Its possible to build in a contingency sum but I do not think the bank would wear 21% as part of an accurate costing.

Still, you have been building and developing for as long as myself so you must have the experience to be right. You say you own three flats and rent another, but, could you build them?

A doctor knows about medicine but he cannot operate on you, only a surgeon can do that.
OP peterweg 36 | 2,316
10 Aug 2011  #184
You have me wondering now how many people on this forum include inflation when counting any assets they own?

People refuse to take inflation into account, well at least western Europeans who have forgotten about it. But its effect is extremity corrosive and very damaging. We are going to see a lot of it over the next few years as reducing debt levels, bailing out the debtors at everybody else expense. On that line of thinking I got the biggest loan I could get and bought a farm, food and basic accommodation being effective as an inflation hedge.

You know people also tend to assign credit card debt as an asset; debt is wealth apparently.

Still, you have been building and developing for as long as myself so you must have the experience to be right.

Then you must be aware of the cyclical nature of the property market, I prefer the stability of my own business area.
Avalon 4 | 1,068
10 Aug 2011  #185
On that line of thinking I got the biggest loan I could get and bought a farm

When considering your application for a loan, do you think the bank took into consideration what inflation might be over the next 25 years?..If as you say, inflation runs at 4% per year, the bank would have to consider that you would be in negative equity within 10 years? I am surprised that they even give out mortgages based on that presumption.
LwowskaKrakow 28 | 431
10 Aug 2011  #186
My impression is that prices for Polish apartments will continue to fall and eventually crash .

This is logical if one takes into account these factors:

1) Almost everyone in Poland got a property mortgage no matter how much they earn and the private debt is considerable
2) A big percentage of these mortgages are in Swiss Francs so people will be struggling and get rid of their property
3)There is an abundance of rentals and the rent prices areridiculously low compared with the rest of Europe
4)The situation could be compared with the one in Miami where millions of people invested in property and the prices crashed.

Which means that cities attracting international investors/buyers(Warsaw, Krakow) will rebound like Miami now with the Brazilian buyers but there will be a huge price correction- Crash) before international buyers arrive or come back on the Polish market and in the meantime the Poles will go into renting homes and not buying them.
Foreigner4 12 | 1,769
10 Aug 2011  #187
One question I have is whether the majority of residential property purchases have been made by speculators (pariahs imo) or by people legitimately investing in a home? My thinking is that the more of the latter, the more stable things ought to be but I must profess my ignorance outright on the entire subject:/
LwowskaKrakow 28 | 431
10 Aug 2011  #188
speculators (pariahs imo)

What do you mean by" pariahs immo?" Apart from places like Iran or Albania ,if a country is nice and the economy looks ok, it always attracts a mix of local and international property owners.

Spain and Ireland did not need the investments of foreign buyers to have their real estate market crash.They did it by themselves.
Foreigner4 12 | 1,769
10 Aug 2011  #189
What do you mean by" pariahs immo?"

Well what I mean is, the people who buy existing properties in order to rent them out are leeches in my opinion. No value is added to society through such activity; though they may be calculating and see monetary gains through such activity, society suffers in the long run. Foreign or Domestic, I view such ways of generating income as detrimental to society and therefor immoral. Feel free to disagree, I don't want this to become an issue of discussion but you asked and I have answered:)
dr_rabbit 5 | 90
10 Aug 2011  #190
the people who buy existing properties in order to rent them out are leeches in my opinion.

Such people increase demand for properties, increasing prices (or dampening price correction), and increasing liquidity of property assets for those holding them, thus allowing those people in Poland who presently own overpriced flats to stop drowning in debt and rent a property for an affordable proportion of their income? OR to free up capital to use for a business to grow the economy.

I wouldn't at all recommend being a property investor unless one really knows ones stuff, and has some particular expertise or practical value they can add to their property portfolio, but a market needs buyers and sellers and I think that foreign buyers being unregulated often is beneficial for the residents of that property market.

That's completely generic analysis - I am not at all knowledgeable about the Polish property market, but something to consider.
Avalon 4 | 1,068
10 Aug 2011  #191
This is logical if one takes into account these factors

Can you have quick look at the Warsaw Business Journal,which, is announcing on a regular basis that new, large developments are being started/planned and, explain why these people are such idiots to be contemplating any projects at all when you and all the other experts "know" that there is a "crash" coming.

Are you so sure that they never learnt any lessons from 2008? and have not done any market research for the demand of what they plan to supply? That must also mean that the Polish Banks that will finance these same projects have also got it wrong. Is that why all the Polish Banks are in trouble and have had to be bailed out?

Well!!! you learn something new every day.
LwowskaKrakow 28 | 431
10 Aug 2011  #192
No value is added to society through such activity

Oops, i bought such a property , but it is a holiday home we rent to cover our costs.
had i known about Polish developers before we would have bought it in Western Europe and just rent in our beloved Krakow...
Avalon 4 | 1,068
10 Aug 2011  #193
Who forced you to buy? the developer?
milky 13 | 1,657
10 Aug 2011  #194
explain why these people are such idiots to be contemplating any projects at all when you and all the other experts "know" that there is a "crash" coming.

Just look at the 'Ghost estate in Ireland', idiots? I dont know. One fifth of the houses are unoccupied due to the madness.
dailymail.co.uk/news/article-1331380/The-ghost-estates-exactly-Ireland-went-boom-bust.html
Poland may not be Ireland but capitalism is the religeon of both countries.
LwowskaKrakow 28 | 431
10 Aug 2011  #195
Avalon , these facts also applied during Spain & Ireland Golden Age in Real Estate Boom? And look at what happened?
Spanish Real Estate is definitely cheaper now than Polish Real Estate for sure!
Avalon 4 | 1,068
10 Aug 2011  #196
Milky, we are talking about "Poland", now, today. Not what happened in Ireland 3 years ago. Can you not accept that Poland did not make the same mistakes as Ireland?

Lwowskakrakow, I see from your previous posts that you are renting out a 42m2 flat in Krakow for 1900 PLN per month, I expect that Poles could get a far larger flat and be paying less, for a mortgage.

Avalon , these facts also applied during Spain & Ireland Golden Age in Real Estate Boom? And look at what happened?
Spanish Real Estate is definitely cheaper now than Polish Real Estate for sure!

Again, you are stating what happened 3 years ago, not what is happening in Poland today. You state that it was always easier for Poles to get a mortgage. I disaree, it was never easy and its even harder now as the banks do not want any risk on their books. You mention CHF mortgages as if the huge increase in the value of the CHF was planned, even the Swiss do not know why their currency is at an all time high, its a blip that will correct itself. I was living in the UK when interest rates went from 8% to 15% overnight in the late eighties. It hurt, but, people managed and things returned to normal during the nineties.
LwowskaKrakow 28 | 431
10 Aug 2011  #197
I expect that Poles could get a far larger flat and be paying less, for a mortgage.

Sure,especially in Spain in Ireland and even in Miami...

Let's be optimistic and hope for the best in the Polish Real Estate market.
OP peterweg 36 | 2,316
10 Aug 2011  #198
When considering your application for a loan, do you think the bank took into consideration what inflation might be over the next 25 years?..If as you say, inflation runs at 4% per year, the bank would have to consider that you would be in negative equity within 10 years? I am surprised that they even give out mortgages based on that presumption.

I got a personal loan in the UK , never told the bank what it was for. I wanted it unsecured with the ability to walk away from the loan without losing the property. Its a 5 year loan, 2 years paid up.

I'm a bit confused over your argument, though. banks only need to consider the risk and the rate they pay for the money versus the rate they charge a buyer.

Inflation isn't their problem, its a help to borrowers. Inflation doesn't make the borrower go into debt, unless you have an inflation linked loan (as in Iceland, you aren't Icelandic are you???). So 10 years into a loan, 4% inflation will have probably added 50% to a property's value (assuming fixed prices) and half the debt would have paid off by repayments. Leaving the mortgage as 25% of the equity.
milky 13 | 1,657
10 Aug 2011  #199
Milky, we are talking about "Poland", now, today.

Spoke, like a true salesman lol....
PERSPECTIVE...the enemy of Ponzi schemes.
Focusing on the here and and now, and ignoring what happens in other countries, is exactly what you should 'never' do; unless of course, you are one of those 'hypnotic salesmen' selling sand to the Arabs at an inflated price.
LwowskaKrakow 28 | 431
10 Aug 2011  #200
I was living in the UK when interest rates went from 8% to 15% overnight in the late eighties

yes Negative Equity.
Let's cross our fingers it does not happen in Poland.
OP peterweg 36 | 2,316
10 Aug 2011  #201
1) Almost everyone in Poland got a property mortgage no matter how much they earn and the private debt is considerable

Not so, a lot use equity from overseas sales (USA) or savings (more tha most countries).

2) A big percentage of these mortgages are in Swiss Francs so people will be struggling and get rid of their property

[/quote]
There are 700K CHF mortages in total, thats a very small percentage

3)There is an abundance of rentals and the rent prices are ridiculously low compared with the rest of Europe

True, but wages are going to rise in future.

4)The situation could be compared with the one in Miami where millions of people invested in property and the prices crashed.

170k apartments were built in the boom. That stands out as a very small number compared to other countries such as Spain which built several million apartments.
milky 13 | 1,657
10 Aug 2011  #202
Not so, a lot use equity from overseas sales (USA) or savings (more tha most countries).

Money earned in the West. I know people who got mortgages in Poland while woking in London and Dublin.

There are 700K CHF mortages in total, thats a very small percentage

something like 70% of mortgages in 2008, so bought for well inflated prices.

True, but wages are going to rise in future.

amen to that

170k apartments were built in the boom.

after Donald promising to build more..eh..
Avalon 4 | 1,068
11 Aug 2011  #203
I'm a bit confused over your argument, though. banks only need to consider the risk and the rate they pay for the money versus the rate they charge a buyer.

I was not arguing, merely wondering why you included "inflation" when demonstrating falls in house prices, when, it is never factored into long term loans as a risk?. It seems that 4% inflaation is bad because of higher prices, 2% is accepatable yet 0% is bad as there is then a fear of stagflation. Surely, inflation has no effect on what you have already purchased.

By the way, your post #215 answering Lwowskakrakow was exactly the same as I was going to write so we do agree on some things.
cms 9 | 1,272
11 Aug 2011  #204
If the house is your home and not an investment then it doesnt have an effect. For that to work however then you would need the total of mortgage payments to be less than the total of rent payments you would pay if you rented.

Rent is generally subject to inflation so when inflation was say 5% then a home purchase should pay off provided that the property was not overpriced and that interest rates do not go crazy.

But if you purchase for an investment and intend to resell the house to cash in that investment then you need to get a real return that is higher than the inflation in that period. Otherwise generally you would have been better off with some other form of investment - German shares Buy Buy ! :)
Avalon 4 | 1,068
11 Aug 2011  #205
If the house is your home and not an investment then it doesnt have an effect.

Exactly. But its been implied that it should be included in the amount of falling house prices and then the poster states "So 10 years into a loan, 4% inflation will have probably added 50% to a property's value" but states previously "Compound 4% inflation for four years, plus 15% gives a real fall of 28%" which is it?
OP peterweg 36 | 2,316
11 Aug 2011  #206
There are 700K CHF mortages in total, thats a very small percentage

Apparently thats 53% of mortgage debt.

Franc-denominated mortgages totaled 151.8 billion zloty in June

bloomberg.com/news/2011-08-10/poland-needs-franc-hit-consumers-to-propel-economy-tusk-s-adviser-says.html

Which is shocking that poles have so little property debt...
alexw68
11 Aug 2011  #207
Apparently thats 53% of mortgage debt.

Something like that - the figures I had from Bloomberg the other day were that 35% of Polish consumer debt were in non-Zloty denominations, and 20% was in CHF. In Hungary, the numbers are double that and then some.
OP peterweg 36 | 2,316
11 Aug 2011  #208
actly. But its been implied that it should be included in the amount of falling house prices and then the poster states "So 10 years into a loan, 4% inflation will have probably added 50% to a property's value" but states previously "Compound 4% inflation for four years, plus 15% gives a real fall of 28%" which is it?

The point is we have inflation making the house worth less in real terms; the debt is fixed and the value of the house is falling. of course in real terms the debt is falling too. What you want is real increase in the value of the property, prices rising more than inflation.

If you are an existing home owner you are paying for an asset that is falling in real value, however eventually you will have repaid the debt and have an asset, along the way you will be in negative equity and screwed if you want to sell. For new potential home owners there is no incentive to buy a depreciating asset, so they hold back and prices continue to fall.
King Sobieski 2 | 716
11 Aug 2011  #209
do any other countries have negative gearing?

you dont know negative gearing?

under australian tax law you get a deduction for interest and other property related expenses on your rental property. ideally works the best if you're on a higher tax bracket.


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