The current property boom in Poland is a bubble

Hi JKChambers. I agree that its not possible to compare Ireland and Poland so easily due to the many obvious differences. However, I think it is possible to try and point out the negative side of property speculation which has been rampant here in Ireland for over a decade and would now appear to be catching on bigtime in Poland. When returns on property becomes higher than returns from which may be derived from new business and industry people invariably invest in property. We have seen this in Ireland. Once prices stop going up the boom ends because the investors leave the market. This is what is happening now in Ireland. What are we left with? As far as I can see a big gaping hole in the economy and very little to show for our boom years. I just returned from Poland this evening and every time I go there a new road of some sort has been completed. Look at the state of Irelands transport system and how long it takes to build anything. Its a disgrace. Yes there have been improvements in Ireland but the reality is that there should have been a lot more. IMO some people got rich quick here but the mentality is the same as it ever was and probably will never change. I hope Poland does not go down the same route as Ireland but it is possible. As for the remittances sent back by Polish people I would guess that the amount is massive and is probably not quantifiable because as you have pointed out much of it goes home in peoples pockets.

PS Just in case people think that Im saying that Poland is perfect could I just say that getting through the airport in Warsaw was an absolute nightmare this evening (Etiuda terminal). It was the least organised airport I have ever been in and that includes Havana where the electricity went off! I would hope that when the new terminal is built things will improve. There were families with children coming back to Dublin after being home in Poland and the whole thing was like going into a football match. The queue was out the door and it took an hour and a half to check in. It was also very dangerous with hundreds of people crowded into a tiny terminal. If there was a fire there would be massive casualties. Really awful. Rant over. Sorry!!!!

is it fair to compare the Polish and Irish property markets?

Maybe.

The real issue, as I see it, is the price of houses compared to an ordinary adult yearly wage.

In Ireland, a house or apartment now costs 14 × an ordinary adult yearly wage to own

What is the multiple in Poland?

Also, what kind of rights do tenants have in Poland? Can a private landlord evict a tenant without any warning period?

In Ireland a renting tenant can be evicted for no reason with 4 weeks' notice. This is impossible in most of Europe, and helps to explain why Irish people hate to rent.

Deise 07 your comments make a lot of sense and a lot of points you have made have been made by my Irish business friends, I suspect the same awaits Poland, where it will be impossible for locals to own there own house and most companies will be foreign owned, (The Soviets bleed the Polish people and what is going on now is no different except it is done by respected people)

The bubble will burst as it did in Japan in the 90's, the same sort of stuff is going on in Poland today ie Foreign investors sell there properties to other foreign investors making a profit and they in turn do likewise, at the end of the day the last person carrying the bundle will become loose out.

We will see our foreign speculators pack there bags and return to there own country empty handed. too bad too sad!

So what's happening in Poland? Are companies building new houses and apartment buildings like crazy to get in on the boom?

As said, in Ireland 15% of the workforce (including hundreds of thousands of Poles) are directly building houses and apartments. A further 10 to 20% of employees are indirectly dependent on the building trade.

Also, are apartments far more expensive than houses, like they are in Ireland?

Here in Dublin, a small one-bed apartment is the same price as a three-bedroom house on the same street.

there are always market corrections however the long term trend is positive.

Actually, Japan's house prices are still far less than they were 18 years ago. Less than half in fact.

Remember, the population of the developed world is shrinking, not growing.

Why will the trend always be positive for a commodity for which demand is guaranteed to shrink over the next 50 years?

I think Dee, that you have just hit the nail on the head. There is no logical reason for property to increase in value simply because it is property. When rental yields are unprofitable the only way money can be made on property is through capital appreciation. In a market in which the average person cannot afford to buy and where capital appreciation is non-existent, property would appear to be a losing bet.

Ireland's property market has had its day. I dont know enough about Poland to provide an informed opinion but as many people on this forum are saying, that if the average price of a property is out of reach of the average Polish salary *6 or more, and where renting out a new apartment will obviously not provide a decent return ie IMO decent return = at least 5/6% yield, where is the capital appreciation coming from? I would guess entirely from speculation. That is what we call a lack of fundamentals, and carries all the hallmarks of a bubble. I would describe it as a pyramid scheme of sorts. As I said I know more about Ireland than Poland but based on the comments Ive read on this site things dont sound promising. However the one joker in the Polish pack as I see it is the possible effect from those millions of Poles living abroad. Its possible that if they intend to return to Poland and bring a large amount of capital for investment in property with them they could perhaps keep a genuine demand which may sustain the market.My girlfriend is possibly included in this category. The way things are going in Ireland at least, many Poles will be heading home pretty soon as the work disappears here. Many will probably go to London for the build up to the Olympics but they will be competing with existing workers and what many expect to be a large migration of Irish construction workers to London over the next 12 to 18 months. So possibly after the Olympics there will be the beginnings of a mass return to Poland. Im speculating here and just calling it as I see it but I would be interested in hearing any other views which may educate me further on the Polish situation.

As for Dees point about the western world's shrinking population, it is a very important point when examining potential property price inflation. The wealthier a country gets the less children that people tend to have.The decrease in child bearing often seems to coincide with an increase in economic production. Looking at the examples of Japan, and also Germany, during the recent past this has led to an over supply of properties for a decreasing population. Again, somebody would have to educate me as to the position in Poland, but the laws of supply and demand dictate that prices of a commodity which are increasing in number continually are not guaranteed to increase if the potential market ie people is decreasing. The opposite is in fact the case. The only conclusion to draw from that would be that property is definitely not a long term investment but rather a short to medium term one.

there is a lot of scaremongering on this forum at least, with people who have no experience of the polish market stating their groundless opinions as fact. these negative views are by no means shared by all and there are experienced investors still happy to put their money in polish real estate.

the discussion about yield does have a point, yet yield is not a fundamental.

there are some fundamentals which we must look at:
1) the cost of land: there is scarcity in good location city center makes. scarcity means more expensive.
2) the cost of labour is increasing everywhere
3) the cost of building is also increasing.

good developements in the city center are expensive to built and thus expensive to sell.

yes but even experienced investors can only speculate and they don't really know 100%. they rid the wave and get off when it gets a little shakey. What I was saying earlier is that this wave is breaking soon but the next wave is not too far behind. Some waves are bigger then others. We are all now surfing a tidal wave.

See you all on the beach!!!

Yes I know...I need a holiday...

a decreasing population is not necessarily a bad thing. it can make up for the unemployment in a country which has actually been happening recently with all the emigration to the uk from poland. unempoloyment rates just a couple of years ago were about 20% in poland....now it's around 11%.

speculation can be a good thing, but it has to be reasonable. real estate investment is a relatively new concept in poland so the people need to keep their "money making dreams" in check otherwise the market won't grow in a healthy and gradual way.

i read somewhere the demand will continure for the next 10-12 years in poland before the supply will catch up. now this doesn't seem to make sense with many poles leaving the country. however...we have to look at the quality of what was here before. i take it to mean that the demand is for a western standard of quality housing. people just don't want to live the rest of their lives in an old soviet era housing developments (not all, but many are in a situation like this).

will young poles return to poland after making money abroad? that's a good question.

how will taxes effect property investment? i have heard in poland that if you sell within 5 years you have to pay 22% VAT. i have also read that a new EU building materials tax is coming in to effect in january 2008. are tax shelters available (i.e. reinvestment)? tax laws need to be tailored to investment needs if real estate is to grow into a healthy market.

the coming of the euro.....the funding for the euro cup. there are many positive signs for the short and middle term, but like i said...poland has to be careful of moving too quickly. growth needs to be kept in check by keeping prices at a realistic growth rate.

remember that there is a limited amount of land to build on in any given country. thus the supply of land is limited. however demand for housing grows as countries prosper and their standard of living increases.

real estate prices have always gone up and will continue to do so in the future across all regions of the world as the global standard of living rises and demand for housing outstripts supply.

People on this forum need to understand that some forum members have a vested interest and try to promote there own agenda, of course if I'm a real estate agent in Poland of course I will tell you every things hunky dory and you will make a fortune.

The fact remains that the smooth talking business entrepreneur will do ok but the average investor will not.
Its interesting that the Japanese are not involved in property investments because they are still licking there wounds from the property collapse in the 90's.

People on this forum have woken up to these likes and will not do any business with these people let alone being sucked into spending exorbitant money in cheap style bed and breakfast accommodation.

once a kunt always a kunt, eh lef

in fact lef, the only person who takes the tinniest bit of ntice of your ramblings on here is me, and i only respond because i enjoy taking the **** out of idiots

Truth hurts . lol

You seem to manage to do that perfectly adequately, on your own, from time to time on here........

You always post in a negative manner, have nothing to contribute, have a bee in the bonnet about some members. Never substantiate any wild accusations you make.

Obviously having another bad day and need to come on here to vent your anger.

You don't live in Poland, do you........even wonder if you are or ever have been Polish as well ??

Hope the day improves for you Lef, so you don't need to post on here for a bit.

:) Have a nice day.

youve been told lef, now fuk off you misserable troll

i would like to know what is wrong with a non POL making money, people have been doing it in different countries all around the world for years. The Japanese own half of Australia. Ok maybe not that much. Anyone who can afford can purchase property in the UK.

yeah. keep the abuse going, you may have met a few forum members, but they are people like yourself, they do not represent the average Polish person.

What is your interest in Poland BubbaWoo, let me quess, oh yes make some money, you have no interest in the Polish culture or the plight of the Polish people, just your own selfish interest! Poland does not need people like you.

pillock

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lol... speak for yourself, you should be ashamed of yourself, what have I done wrong to you.. what do you want from me, the vast majority of Polish people would shout me a vodka or two for being so patriotic.


provide the facts, not in real estate at any rate.

Er why ? Explain please ? I think your comment should be directed towards yourself. I think you make a lot of wild accusations and comments and direct them at specific individuals in a very personal attack. And I don't like that !

I only know Bubba from his posts here and the same is true for other regular posters. i form my own opinions from what they say in their posts.


I don't think so Lef. Are you actually Polish and living in Australia ? If so, when did you last visit Poland ?


See here. You ask for facts but when someone asks the same for you, you just disappear for a while and then start spouting off generalisations again and with no specifics. We make opinions on you, based on what you post. :(

you didnt read all my quote lef, and you as a so called Australian or are you Polish or both, would know that they own quite a bit of queensland realestate, hotels etc..

[quote=Lady in red] I only know Bubba from his posts here and the same is true for other regular posters. i form my own opinions from what they say in their posts.

I'm not going to be involved in a witch hunt, I try to echo the concerns of the polish people, you are not Polish and you do not understand.

Sure I live in Oz, but have been to Poland more times than you have had hot dinners.

that maybe correct Lef, but you don't live the life of Polish people.

Polish parents, born in Australia, sure Japanese are buying big in Queensland because it is heaven on earth (sorry for the pun), secure as the Bank of England. You have to go there to appreciate it. Remember Queensland is only a small part of Australia.


I know the mentality of Polish people, been there and done that. I'm not having a go just making a point.

I've got to go, get back later.. have a great night.

yes i know that, and i much rather melbourne to queensland, more of a multi-cultural society

Oh but according to the Polish government I am Polish !!

I was born in the UK that's true but was brought up as a Polish girl by two Polish parents who in turn were brought up by their Polish parents.......So, I think one would easily consider me Polish but UK born !! Also, I inherited and learnt all about Polish things from the first day i drew breath.

I do not consider you a spekesman for Polish people. just a man who lives in Australia who thinks he knows it all......Boring !!!

So lef.......born to Polish parents in Australia and you are the'expert' on Polish peole ROFLMAO !!!!!

Who the heck are you to say whether someone is Polish or not, or what the majority of Polish people think. Another person, who thinks views from a couple of people means a whole nation thinks like himself.........weird........sounds a bit dictatorial to me !!

Exactly, I was born of the British parents in Akrotiri Cyprus, but i'm British, it says so on my birth certificate. So i'm sure LIR you are Polish.

However i'm wondering if like me you can have a passport from the country of your birth, for example i hold both British Passport and Cypriot one??

OK - so you folks obviously got history and Im not going to get in the middle of it.

Just a question to Bubba and anyone else who cares to answer, you seem convinced that Polish real estate is in a very healthy position at present. Can I ask you if in your opinion that is location specific or whether in your opinion, it applies across the board? Specifically, I am interested in Poznan as that is where my other half is from. Also, in your experience is the market a "real" or "false" market ie is it made up of Poles or foreigners for the main part? Can you or anybpdy else provide links or statistics which shows a breakdown of ratio of Poles v foreigners participation in the Polish property market? Also can anyone confirm what current rental yields are in Poznan? Again, is there anywhere that such information can be accessed? Apart from my uber-bullish prospective Polish brother in law I seem to be unable to find out what rental levels are at. Each source seems to give different information. As you've probably guessed Im a bit cynical when I hear the words boom boom boom. However, Im always open to persuasion backed up with hard evidence. Thanks