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The current property boom in Poland is a bubble


Zeze
13 Aug 2007  #1
dear all
as a small developer in london, with a personal interest in poland, i have followed the polish market for a while - but never invested in it.

the polish residential market is being driven by easy credit by the banks, usually in swiss franc, the banks usually have an interest in the construction companies, the banks also have customers all of which are looking for an easy way to make money- anyone see a pattern ?

the fundamentals in poland are not there, it does not have a strong economy, poverty is rife, wages are still low, the current property boom is a bubble- this bubble will burst,

investors- beware! do your research,

This is a wise advice so that is why I am passing on
Michal - | 1,865
13 Aug 2007  #2
You can find that you are thinking that you are buying something in Poland and then find that you do not own it at all. Yes, I agree, beware!
Lady in red
13 Aug 2007  #3
it does not have a strong economy, poverty is rife, wages are still low, the current property boom is a bubble- this bubble will burst,

.......sounds like the Uk 30 years ago.........rofl.........
dasla - | 52
13 Aug 2007  #4
i think it depends on how much foreign investment ie.companies moving into poland which will help boost the economy. from what i can see there are alot doing so at the moment.
witek 1 | 587
13 Aug 2007  #5
the fundamentals in poland are not there, it does not have a strong economy, poverty is rife, wages are still low, the current property boom is a bubble- this bubble will burst,

Poland's economy is improving:

1. GDP growth 6.2% (2006) 7.1% (2007 est.) which is twice that of the EU average
2. unemployment is down to approx. 12.4 % (due to migration to England/Ireland)
3. wages are going up ( currently average salary is approx 2600 PLN or $1000 CDN)
4. there is increased foreign investment in Poland ( it ranks 7th in terms of
investment attractiveness)
dasla - | 52
13 Aug 2007  #6
thank you witek,
my companies been looking at a factory in poland so yes its all good news.
lodzinvest - | 11
13 Aug 2007  #7
disagree. i think that the fundamentals are in fact there. polish economy is developing twice as fast as the western neighbors. so there is a tendency in the coming years for high growth...

what can be the problem though is the reclaiming of war properties from germans and jews. this uncertainty is in fact unacceptable. the polish should solve the issue with an amendment of the constitution. the must also modernise their property laws...
szkotja2007 27 | 1,500
13 Aug 2007  #8
Recessions a coming thats for sure - gonna hit everyone - Poland will be one of the least affected. All IMHO of course.
Depends where the foreign loans are secured and with who.
spiritus 67 | 663
13 Aug 2007  #9
None of us know what is going to happen-we don't have a crystal ball.

Zeze is right in his/her logic but logic doesn't always dictate the way a particular market is going.

Will the property bubble burst eventually in Poland ? Yes. But when and how hard will it land can be debated until the cows come home.

The world Stock Markets had a similar meteoric rise a few years ago built upon tech. hysteria. The difference with property is that people always need somewhere to live but stocks and shares are not essential.

Zeze, as a developer in London, where's the logic behind the current UK house prices ? They should have slowed down years ago but haven't.

Whilst intellectuals are predicting doom and gloom and watching by the sidelines others are getting their hands dirty and are making fortunes from rising property prices ! Astute developers would have entered the Polish market years ago and retired now on the profits.
Osiedle_Ruda
14 Aug 2007  #10
Surely the only really strong economy would be one where no-one had any debts?

You only need to look at how worried people are in the UK when interest rates go up by 0.25%, even though the base rate is currently about 5% or something. Like many people, I still remember paying 15% interest rates, years ago, and it hit me hard - but in this country at least, many have recently taken on extreme levels of credit, so smaller rises may hit just as hard.

A "strong" economy based entirely on credit is quite clearly a recipe for disaster, and if that's the way the Polish economy is headed, the bubble will burst there as well - though probably not quite as badly as when it bursts in the UK.
OP Zeze
14 Aug 2007  #11
Oh I am just Passing on the text I friend send me these are not my words but i agree with them .
micerl
14 Aug 2007  #12
Hello people!

Reckon this is what will happen to Polish banks too?

today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-08-12T131654Z_01_L12292110_RTRIDST_0_POSTBANK-SUBPRIME.XML

It's all there; Generous lending opportunities, sky-rocketing prices and foreign investors looking to make a $...

I really, really, really hope this type of financial collapse (leading to social collapse) won't hit Poland. Yet.
diamond - | 10
16 Aug 2007  #13
i have to agree...the prices have gone up too quickly and the wages just don't come close to matching what they are asking for these days.

i hear a lot of talk but see little action if you know what i mean.

i think some people are just hoping to get lucky.

there are other complication with polish real estate....from what i have heard you have to own something for 5 years in order to not have to pay 22% VAT tax....which is quite high and pretty much can drain whatever profit you could make. it's not conductive to a healthy buy/sell market. (if you know more about avoiding this tax i would like to know)

hopefully people in poland will wise up and realize that a gradual increase is more realistic and healthier for the economy. otherwise people will be waiting years or be stuck in unatractive loans.

"it ranks 7th in terms of investment attractiveness" <--- curious where you got this info from
ogorek - | 165
16 Aug 2007  #14
Astute developers would have entered the Polish market years ago and retired now on the profits.

Exactly. The money has been made at this stage. Anyone investing now will not gain much. The thing to do is now wait for a while. Property markets boom in stages. The next boom stage will be - whenever it comes.
BubbaWoo 33 | 3,512
17 Aug 2007  #15
The money has been made at this stage. Anyone investing now will not gain much

there is still plenty of money to be made in polish property, now and in the future... if people havent worked out where and how then its obviously not for them...
szarlotka 8 | 2,209
17 Aug 2007  #16
The only difference now to five to seven years ago is that you need more thought in each investment decision. The days of no brainer decisions are probably over. (which is why I've pulled the plug cos I'm not smart or motivated enough).
Lady in red
17 Aug 2007  #17
Surely the only really strong economy would be one where no-one had any debts?

"tis a very good point Ossie :)

there is still plenty of money to be made in polish property, now and in the future... if people havent worked out where and how then its obviously not for them...

Well, yes and no is my view. Not everyone is shrewd and has sufficient commercial acumen but that doesn't mean they can't or shouldn't invest. More that they need professional guidance before they do !!

Also, the most experienced investor can get their fingers burnt.............

:)
BubbaWoo 33 | 3,512
17 Aug 2007  #18
you need more thought in each investment decision. The days of no brainer decisions are probably over

every investment decision needs appropriate thought but there are still opportunities that are pretty much no brainers - you just have to see them and be in the position to take them which not everyone is
Lady in red
17 Aug 2007  #19
Szarly, it's a wise man who knows when to stop !!!

<g>
szarlotka 8 | 2,209
17 Aug 2007  #20
Szarly, it's a wise man who knows when to stop !!!

It is a wise man who knows when he is exceeding the limits of his ability. I'm not a professional property specialist. I started off buying an apartment in Warsaw when I was out there because for three years it was cheaper then renting. I was then approached by my then PA to go into business to buy some more (i.e my money her brains). It just grew from there until this year when she exercised her option to buy me out. Result - I made some money, she is now a very successful business woman, the lawyers made money and the Polish government got a very considerable sum of money in capital gains equivalent taxation and income tax revenues.

Like BW says there are still bargains to be had if you are preared to look for them and can overcome the barriers to commerce that exist in PL.
Lady in red
17 Aug 2007  #21
It echoes the Uk property market in some respects :)

Will be quite interesting to see what happens in Poland over the medium term.

9/11 artificially drove down interest rates to ridiculously low levels in order to stimulate the World economy because of the fear of a major downturn. (Lots of info re this see ex Governor BoE ) At the same time there was a major change in legislation which resulted in most Finance Institutions making more 'cheap money' available in the mortgage markets. Hence, the buy to let boom where it would appear many small time investors were encouraged to 'buy' that additional property as it would boost their pension , when they retire. And of course. all the press were helping to stimulate with their 'fear ' factor press reports about pension funds in future years. Fortunately for some in the Uk, it looks as if future interest rate hikes may be limited in the medium term. (Big sigh of relief I'm sure )

Otherwise, like the US there will be some major repercussions. (As seen over the last couple of volatile days on the world stock markets).

Thing is , people do get their fingers 'burnt' quite easily. They tend to not do their homework and their sums and end up with problems that could have been forseen. speculating in overseas markets, with no prior knowledge is just fooolish UNLESS you are with someone who knows that market well or as in Bubba's case, it's a life long career in property investing in several countries.

Also, many people think it is an easy way to make money and they should jump on the next bandwagagon i.e the next hotspot .......<g>

Thing is you made a profit not a loss :) Sounds like you lost a great PA too !!
szarlotka 8 | 2,209
17 Aug 2007  #22
Sounds like you lost a great PA too !!

Yes but I gained a great friend!
Lady in red
17 Aug 2007  #23
That's great. A good accountant helps too.......<g>
szarlotka 8 | 2,209
17 Aug 2007  #24
A good accountant helps too

Had a very good accountant in PL but can't be too friendly with her - Mrs Szar dubbed her Klaudia Schiffer II !
Lady in red
17 Aug 2007  #25
Mrs Szar dubbed her Klaudia Schiffer II

Lol..........<giggle>

:)
deeIrish 7 | 33
17 Aug 2007  #26
Ireland currently has a loony house price boom, which is wrecking our economy.

People think the Irish economy is strong, but it's only American businesses and house builders who are doing well
Lady in red
17 Aug 2007  #27
which is wrecking our economy.

Care to expand on that comment? I'd be interested to learn how the 'house price boom' is capable of wrecking Irelands economy ?
Deise 07 3 | 76
17 Aug 2007  #28
Im Irish so Ill try to answer that - Over the past 10 years Ireland has experienced a massive boom. Most people are of the opinion that it has been very beneficial for the country as there is a lot more wealth about the place which wasnt there before. This has resulted in a lot of changes in Irish society including an influx of immigrants, many of whom are Poles as you probably know. The problem with the boom has been that it has been lopsided and totally based on construction. Construction now accounts for roughly 25% of Irish GDP and about 15% of all employment. House prices have quadrupled in the same period so much so that many Irish people rather than investing in new businesses have instead invested in property due to the massive returns. As a result we have practically no Irish owned industry. Roughly 90% of the Irish industry is made up of foreign owned firms, many american. House prices have in the past 6 months began to decrease and as a result it now appears that the building boom will soon be over because it is estimated that speculators made up about 40% of all house buyers in 2006.If prices are going down speculators will not enter the market. As construction accounts for 25% of Irish GDP we can assume that it will hit the Irish economy extremely hard over the coming years and many smart people fear the worst. In fact some people I know are already beginning to emigrate or plan to do so over the next couple of years. Due to the house price boom we basically fell into a trap where the economy became a sort of pyramid scheme whereby people just sold houses to each other. Following the recent interets rate rises that is no longer possible. Its not beyond the bounds of possibility that in a few years time many Irish construction workers will be working in Poland. Think thats crazy? Remember less than ten years ago the thought of English or Germans coming to Dublin to work would have been laughed at by Irish people because we were all in their countries filling the low paid jobs. Not anymore. This is how globalisation works. 10 years ago it made sense for americans to set up in Ireland. Low wages, good education system, access to EU. Now it makes sense to set up in Poland or Czech for exactly the same reasons.It is expected that Dell will move most of their Limerick operation to Lodz pretty soon. In 10 years time they will probably be off somewhere else.
jkchambers 3 | 33
19 Aug 2007  #30
House and apartment building in Ireland is now slowing up. Many developers are now cutting staff and closing down building sites. House prices are falling. We are told that they have dropped 2 pc this year. I would think the figure would be 10 to 15pc. That said road building and industrial estate building is going on well and will continue to do so.

There will be some knock on effect to the Irish economy. Already unemployment figures are going up. The government revenue from stamp duty on houses had slowed up. This figure has been huge as average house purchases in the Dublin area attract stamp duty rates of 6 to 9 pc

Over the last 12 to 14 years house prices have risen at an alarming rate. I bought houses in 1995 which are now worth over 10 times what I paid for them. It is really no harm that prices settle and maybe drop a bit. This will now happen because investors and non nationals have fled the market.

I think that prices in Poland will continue to rise for another couple of years. Poland will be in receipt of billions in EU funding and other inward investment. Does anyone know how much is being sent back by Polish workers working abroad ? I read somewhere recently that £11m a day was been sent back from the UK through the banking system. I dont think this counts what comes back in cash.

I really dont think it is fair to compare the Polish and Irish property markets. Ireland has had over a decade of good growth while Polish growth is only starting


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