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The coming Real estate correction in Poland.

9 Aug 2017 #1
Circa 2017, Polish residential real estate is in a flux especially in the big cities.

1. There has been an over build of Osiedles.
2. Luxury property has seen a 100% increase in value over the last 18 months.
3. Real estate agents are now pushing suburban areas with good rail connections to the center.

There is no transparency in Polish real estate, unlike the UK, as an example.Investing in Polish real estate is a one way street as there is little to no liquidity on the exit. My call is Polish residential wil drop by 15-20% after 2020 when EU funds kick back. Enjoy and be cautious.
delphiandomine 88 | 18,331
9 Aug 2017 #2
1. There has been an over build of Osiedles.

There most certainly hasn't in many big cities. Demand still outstrips supply.

2. Luxury property has seen a 100% increase in value over the last 18 months.


3. Real estate agents are now pushing suburban areas with good rail connections to the center.

Nothing new there. The railway networks are getting better and better, and many of the best sites have already been built on in cities.
9 Aug 2017 #3
There has been an over build of Osiedles.

More than 50% of flats were bought for cash last year so people aren't overstretching themselves. A lot of buy to let and for investment purposes. Domestic demand is strong as well as increasing foreign interest. Poland has been unloved for a long time, any rerating will last more than a year or two. Flat prices have been marginally increasing y/y as developers have been keeping up with demand, so while there have been a large number of flats built, the demand is there and prices haven't run away.

Because there is less available land to build on in city centres, its natural that cities expand and flats are being built further out. A few miles from the centre but still within the city limits has been popular and infrastructure/services are quickly developing around those built even on the outskirts. Certainly in Wroclaw areas like Oltaszyn and Partynice in the Krzyki region are thriving and a fashionable area to live with expanding local services and close proximity to the centre.

I would say there are some weaker sectors and locations, but in general I think we are going to ride on the coat tails on Europe on this cycle.
OP synka
9 Aug 2017 #4

Poland has been second worst performing residential sector over the last 17 years out of EU 28. The worst was Romania.
OP synka
9 Aug 2017 #5
Delph, I do not need to place a source for Luxury prop in PL. Polinv is a real estate investor/agent he would have brought me to task if I was wrong.
OP synka
9 Aug 2017 #6
Polinv, check knight/Frank or PWC focus on real estate The European market is saturated and now we only have cities, expected performers are Barcelona and Berlin, Paris is safe, the rest of the EU is overpriced. No city in Poland is included in the investment hotspots 2017-2020 in comerc or Res.

Polinv knows very well Polish res is on the retreat across the board. You can always offload to foriegners which is what is happening now.Polish real estate investors are offloading stock at high prices and the agents are in on the ruse. What is needed in Poland is a Zoopla or Rightmove to create a transparent market on sale prices.Poland is not a market for widows and children at the moment.Fact buddy and you know it.
OP synka
9 Aug 2017 #7
Delph have a look at the following lik from the 6/6/2017 as a source

Recall there are those which never believed Lehmans would go under...
OP synka
9 Aug 2017 #8
Delph maybe you missed the article at Bloomberg...
9 Aug 2017 #9
Taken as a whole (some prices in lesser cities are still at 2010 levels or even lower), then Poland has done very poorly in relation to rest of Europe over the loast 10 years. That goes for most asset classes be in property or stockmarket. However, since last year there has been a visible rerating and the WIG20 is one of the top performing indices YTD. Yields on commercial have been squeezed but that's more down to fundamentals rather than a bubble. Commercial is very fragmented in Poland and ripe for consolidation, which may take place during this cycle or the next. As I have said elsewhere, the political situation isnt anything to worry about for investors at least, just take a look at Hungary and asset performance there. The "Orban trade" will have lost you serious money as assets there took little notice of his interference, performing very well and it should be a similar case for Poland. I think office and shopping centres are saturated, I would stay away from those, as well as poorly situated new build commercials/flats. Prime commercials and secondaries are the ones to go for, you can still pick up yields in region of 7% netted out. As for flats, you can probably get around 5-6% if you're an average Pole so you can see why there is a mini boom (renovation/decorating/furnishing) in this area as Poles see it as a better store of value and income than banks. For foreign investors its often a case of the exchange rate, but in most of the majors vs PLN there is still some cycle upside for PLN. Sterling is a specific brexit story but has added to the return on Polish assets and I expect there is still another 10-15% to go here (use eur/gbp parity as a target) before you'd think of switching on an isolated fx approach.
9 Aug 2017 #10
Regarding employment, there are over 100,000 Ukrainians in Wroclaw, one of the largest and fastest growing cities, while smaller cities with econmic tax regions such as Swidnica have seen 20,000 Ukrainians enter the system. These are full fat figures, not the offical ones which show a lot less. You only need to visit a building site and you will find you need a good grasp of Ukrainian to get by! Poles don't really want to work for 1500/2 grand a month anymore and some of these jobs are being filled by them.
cms 9 | 1,255
9 Aug 2017 #11
Where does this 100.000 figure come from ? I heard it a few times but it cannot be true. I studied this week footfall figures in a number of Wroclaw shopping centres which showed only modest increases, comparable to other Polish towns. So unless these people don't buy groceries I am really skeptical about that. Where would they live for a start ?

I think current price levels are ok if you want to live in your flat. I am surprised about Poland being the poorest performer over 17 years and suspect that is in EUR, not in local currency.

As an investment then my own experience is that yields are poor for the time involved and the risk created by Tenant friendly laws. I know some here claim 10 percent yields but my own flats are struggle no to do 4 percent once I throw in empty times, tax, repairs, gas for travel to sort out issues etc etc. Repair costs especially have gone up a lot as have things like security and cleaning due to minimum wage rises.
9 Aug 2017 #12
Its changing and you are finding Ukrainians are now buying flats in Poland, but most and certainly fresh arrivals are renting and acting in a way that early Poles in the UK did ie. sleeping cheap as possible, living very tight, saving money. So you wont find them at the shopping centres. As I say, the earliest arrivals, many are beginning to settle, but it takes time.

I stay away from residential because the yields dont compare to commercial, but for the average Pole who will find it hard to gather min million for commercial, even a 4-5% net on flats is better than in the bank. I think you do well to get high singles and then its not on a sustained basis over a number of years. Maybe on the coast, but you probably need to be hands on. Most like their investments to take care of themselves and thats what you get with commercial. As for liquidty mentioned earlier, yes its worse than in the West, but good location and competitive yield always sells.
cms 9 | 1,255
10 Aug 2017 #13
But they have to eat surely ? And a supermarket would be the cheapest place to get food and somewhere that would suit their unsociable working hours. I just don't think this 100.000 figure, which would almost double the labour force of Wroclaw, is plausible. Diggler keeps mentioning it in in his obsessive anti Islam threads but I am really surprised by that number.

I agree that 4 percent is better than the bank - but I am getting 2 percent on lokata now and the only work involved is a few phone calls. Finding, buying and managing a flat is time consuming and stressful. Still I am going to get something else in the autumn once I can face it :)
DominicB - | 2,709
10 Aug 2017 #14
I just don't think this 100.000 figure, which would almost double the labour force of Wroclaw, is plausible.

"In 2015, the Wroclaw District Employment Agency alone received 36 thousand applications from employers (99% of which concerned Ukrainian nationals) who sought to employ foreign professionals using the simplified procedure. The procedure applies to the citizens of the following six countries: Armenia, Belarus., Georgia, Moldova, Russia and Ukraine, who are legally eligible to work in Poland for 6 months over a period of 12 consecutive months without the necessity to obtain a work permit," says Maciej Sałdacz, Deputy Marketing Head at the District Labour Office in Wroclaw."

So the 100,000 figure is not completely implausible due to the uptick in Ukrainian migration over the past few years. Also more plausible if the "District Labor Office" in Wrocław covers a larger area than just the city itself. And very plausible if it covers the whole województwo.

That's 100,000 Ukrainians working in the city during the course of the year, not at any one time. By far the bulk are temporary or seasonal laborers who work six months out of the year or less, as they are allowed to. I suspect that many of them are provided room and board outside of the city by their employers, and driven to the work site every day. A lot of the rest live in workers' hostels. There was one where I lived in Wrocław and I think most of the residents there were Ukrainians.

This does not translate to 100,000 immigrants, or 100,000 potential home buyers, or as you note, 100,000 happy Biedronka shoppers. And certainly not 100,000 Ukrainians who call Wrocław home.

They also keep to themselves and do not mingle. They don't have the time for that, and they are focused on earning and saving money to take back home in a short time.
10 Aug 2017 #15
I'm not developing at present but am close to those that do and others that work in the trade and I can assure you that the numbers are certainly there or thereabouts if one goes by the building trade or hotel&leisure. Some agents I know have been selling studio or small flats to Ukrainians. Its a minority but as time goes by (things wont get better in Ukraine as there is political will for things to remain as they are lets say), they will begin to move up the scale from 10 to flat, to renting by themselves, then maybe with family then maybe buying a small flat. Of course there will always be those that will live out of a suitcase and want to return, but many will make a life in Poland.

You can get 1.2% on a "banka" current account at pkobp, no limits so you access whenever you like. That same money can get you an 8/8.5% yield right now with a long term contract (10yrs). Beats whatever you will get with flats any day, probably twice as much once you net everything out.
DominicB - | 2,709
10 Aug 2017 #16
Of course there will always be those that will live out of a suitcase and want to return, but many will make a life in Poland.

I think many more are interested in moving further westward, and are using Poland as a jumping point.
OP synka
10 Aug 2017 #17

Not quite sure exactly where you are going with the Ukrainian sidestep. As we are talking about experiences in the RE sector Pol, developers are not so keen on Ukrains as they get pissed on the job or turn up to work rotten. Its for this very reason Indians,Pakistanis and Phillipinos are being brought in from the ME.Moreover Ukrains are not adding to any current activity in the unit sales, the reasons are as follows.

1.Interest rates are at the lowest since 89.
2.EU funds trickling down.
3.Unscrupulous agents lying to foreign buyers on luxury.
4. Anticipation of REITS operating in Poland.

As previously mentioned in my previous post large pools of stock was bought up during 2009-2012 with the single intention of offloading at significantly higer prices in the future, these units have kept the agent sharks busy for the last two years.There are now luxury properties in Waw,Wro,Krak and Gdk being sold to foreigners with no hope of there being any form of ROI over the next decade.

As a final interest rate will start to increase in Poland as from 2018 Q2 and remittances from the UK are already on a downward trend, .
10 Aug 2017 #18
Developers are most interested in keeping costs down. From what I see firsthand and hear from friends in the area, the majority were being used for the lowest piad/skilled jobs over the last year they have been doing more of the skilled jobs on sites due to a lack of local workers, thats the official story. The real story is yes the labour market is tight, but locals that are still around to do the job have been pricing themselves out of the market. The quality of work on these new blocks of flats isn't up to the standard of those even 10 years ago, but thats due a lot to cost cutting by developers, subcontractors and workers. Everyone takes a slice and the finished article ends up being of a lesser quality. But Poles are resouceful and it has kicked off a mini boom in the buy to let market on the domestic front.

As for these luxury flats from 2009/2012 I think you are talking about certain small niche markets as during that period, prices were still falling. Flat prices in Warsaw bottomed around 2013 and have been creeping higher since y/y but nothing more than than, same for Wroclaw. Overall, taking just the larger cities into account prices have been moving marginally higher y/y, marginally. The whole market together, prices are really flat since the bottom. These are all statistics and there are certain local markets and segments that are up or down a lot more. Certainly its possible large investment funds made purchases with a view to sell on a few years down the road. As for foreigners getting conned into buying mutton dressed as lamb, thats always going to happen. The facts right now are the economy is moving along nicely despite the best efforts of some in charge. Secondly, overall moves higher have been from a low base (again you can point to pockets both sides of this argument). Inflation is a problem for the whole world in that there isnt any officially, so even if rates do go up, it will be marginally. Given that many flats are bought without the help of a loan, using cash, any hike is not going have a large effect. New flats in Wroclaw have been going for around 5-6 grand/m2, thats an average. Of course some have paid 10k or more in one or two builds, but its isolated. On the whole price rises for new builds have been very small y/y as supply has kept up. Fundamentals are a lot better than the 2004-2008 period on EU entry where yes it often was a free for all and some folks were paying 20 grand per metre. If you look carefully in the offers for sale you will still see the buyers trying to offload them for similar money, but no one is biting.
OP synka
10 Aug 2017 #19

Its the age old 'pump and dump' strategy which has been going on in the West for decades. Pump luxury and all other areas will follow. There are many Lux developments being built now in Waw at 20-30,000 zlotys M2. These developments are being sold by foreign owned companies to non Polish investors, they are being told these apartments will be bought out by foreign owned Reits as soon as the market law PL. As for your assumption that flats prices bottomed in Waw this is simple not true, from 2013 many of the scheduled development projects and been changed to buy to let projects you could buy a 40=45 M2 flat for around 300,000 zlotys the quality build is so **** it will not last 50 years. So its money in a hole. Reading into what you have to say Polinv your knowledge of Waw is not in depth. Better stick to what you know bud.
10 Aug 2017 #20
Waw at 20-30,000 zlotys M2

We have one or two in wroclaw, sky tower for eg. but this isnt the main or the average. I choose not to be an investor in Warsaw but its not the norm there either. Average prices are around 10 grand there for run of the mill. As for Reits, I doubt reits are going to be interested in anything less than a few million, Id be surprised if anyone would fall for that, but idiots and their money...

As for your assumption that flats prices bottomed in Waw this is simple not true

Well actually it is, these are compiled prices.

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