Foreign investor, properties in Poland, walk away from mortgages?

I understand where you are coming from.... I would argue that if the banks were prepared to give you a loan they should be prepared to wear the consequences... It seems to me that you borrowed almost the full amount?

It seems to me that the property market has bottomed and looks to remains such for some time. To get a bank loan for 50,000zl is easy but for amounts much higher you need secure well paid employment.

Thats the UK, Poland hasn't has a recession and probably won't do, even if the SHTF with Greece.


Hang on, they are debts, not assets. How would that work , surely it would be fraud?

Where have you been for the last two years?

We are not talking about figures printed in the paper, we are talking about real life on the streets.


pweg, if you sell your house/apartment/flat to buy something else, are you selling an asset or a debt?

I'll admit I haven't been back to Poland in the last 2 years to see how things are going - but I can say that the values of my property in Poland have shrunk from the original value, by about the same amount (20-30%) as my similar property in the UK. So at least in terms of property, if not all the rest, it seems that the economy in Poland has gone in a similar direction?

And by the way, I believe the S has already HTF in Greece, and it is only going to get worse - whichever direction things go, Greece is in for trouble - and this, and similar situations in Europe will hit countries like Poland (who have significant assets, >50% based on what I read recently, valued in CHF) the hardest. It really seems like a domino effect is going to happen here, and Poland hasn't seen the worst yet.

So I've already sent a request to my lawyers in Poland to find out about options for transferring ownership to the Ltd Co. I'll let you know what they have to say.

Regarding the LTV on these loans - 2 were at 90%, one was at 75%.

Poland is expected to grow by some 4% this year, so it's not going to go into recession anytime soon, despite what is happening in Greece, the EU is still in upward recovery mode.

[quote=hague1cmaeron]Poland is expected to grow by some 4% this year, so it's not going to go into recession anytime soon, despite what is happening in Greece, the EU is still in upward recovery mode.

This is the same advice people were given years ago, everything is going hanky dory and just buy up...hmmm no thanks

hague1cmaeron, as an armchair observer of Poland, you have limited knowledge of what is happening here, as I understand you are based in Australia, my words of wisdom to you would be " facts may not figure, although in the case of PL, alledgedly figures have proven to be lies"

Just for you to recap your 101.

In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way. Production, as measured by Gross Domestic Product, employment, investment spending, capacity utilization, household incomes, business profits, and inflation all fall during recessions, while bankruptcies and the unemployment rate rise.

I can assure you, all is not as good as you believe, on the Eastern front.

Even the US is growing by 3-4% this year - but from what I've heard, economists don't consider that strong enough growth for a recovery from the recession - unemployment is still going up.

I've just done some quick numbers to see how bad things are for my portfolio. If my calculations are correct, I would need CHF to come back down at least halfway to where it was in 2008 (i.e. come down about 20%) and also for my property value to at least recover to original levels (they have lost about 23%) and then get a further 10% property value increase (so that's about 40% total growth needed from this level), and at that point my net exposure could be back to zero (of course still cutting all the cost out of my pocket so far as a loss, which is still quite significant). To fully recover my investment, I would need a further 20% property growth on top of all that.

So in other words I need to see about 70% property growth, along with 20% devaluation of CHF, before I can even start to think about profit.

Alternatively, if we could get CHF down 40% and property growth of 30%, that would also get me back in the black.

Not sure how likely either of these scenarios are in any near future - and not sure if I can sustain the monthly excess cost at current levels for years to come while I wait it out.

He's in negative equity so its a debt not an asset. I cannot see a bank allowing transfer of a loan to a Ltd company, they would demand a massive equity injection. Many BTL investors have had demands for new equity from existing loans in the UK.

The UK is not PL, he will need to get valuations from PL, I am sure his accountant will sort it out for him.

mglaze, out of curiosity which Polish city did you invest into. On those numbers, it looks to me like Krakow or Wroclaw?

I'd say thats a possible scenario by 2014 which is when I expect things to stabilise/look up


You don't judge anything by looking at the street. A booming economy can be simply a huge borrowing spree (e.g. Uk in the early 2000's) and empty street could be short term fear. The figures for Poland are basically very good, far better than the rest of Europe and US. Poland is a cheap place to employ people (wages for a software engineer are the same as China, for instance) and that drives inward investment, particulary from Germany which is in turn driven by Asia - which is booming.

Are you familiar with Poland, because you keep comparing it to the UK.

What does that mean? Banks will take fake valuations for property? I assume these are new properties with very well defined price range and independent valuations will be available. You think a Polish or British accountant will be able to bamboozle a Bank into accepting a fake valuation and not end up in jail?


Well I've lived in Krakow for two years but economics is universal, there is nothing particularly special about Poland's economy. The uncertainty in the statistics seems to have been worked out and quite frankly if I look on the streets in Krakow I see newer cars, better dressed people, spending money and developing the city.

Poland is not in recession according to the statistics of from what I can see 'on the street'.

Nor is it according to more 'reputable' measures.

That said, inflation is threatening the recovery. The NBP has hiked rates I think 4 times this year and an inflation forecast had to be adjusted upwards in Q1 - a change that spooked the markets for a while.

Inflation is a sign of an over heating economy, not recession. Although a large part of it is also import and commodity prices (which is why the UK and US have high inflation and cannot raise its interest rates as it will cause a fall back to recession). Poland has the ability to raise interest rates because its economy and currency are comparatively strong. Poland can get inflation under control with interest rate hikes, and it has the advantage of having low wages and prices to start with, once they are at Western European levels it will get more difficult. But thats probably ten years hence.

No -one is trying to bamboozle anyone, it would be up to his accountant to ascertain the value of the real estate, he would do this by getting 3 independent valuations from accredited companies, (real estate brokers). When mglaze adopts the valuations on behalf of his Ltd, he will be responsible, not the accountants.


When you look on the streets of Krakow, you see more access to finance, in a recent survey in Poland, over 60% of loans taken from the bank were for consumer purchases Furthermore PL is more akin, circa 20111 to the late 80's yuppie boom. People have been draining their real estate equity for cash to fuel their, rising living standards.


I would not consider the PLN to be comparatively strong, when previously we have seen it at levels of EURO/PLN 1-3.25

The loans will still be in his name.

If he wants to transfer them to a company the bank will have to give their valuation and specific a LTV ratio and new interest rate, taking into account his ability to repay. The existing loans would have to be closed out, thereby freezing the loss and it would pass to him, personally. The LTV would reduce and the interest raise if he revalued as a commercial lender.

The accountant is responsible if he partakes in fraud and very few will do it. But, hey, he can give it a go.

When all is said and done, the decision has to be made by mglaze and his financial advisor/accountant.

Big mistake....

he is aware of the past. and as he said that's not what the thread is about

Its the bank's decision, he and his advisor's can ask.

His financial advisor, may be the bank or part of the group, which he received the mortgage through/from. No need to split hairs- pweg.

Warsaw and Krakow actually. Krakow down only 12%, but Warsaw well over 20% down (in my case anyway)..

Ok guys, let's not get carried away - no one is proposing "fraud" or anything else criminal/illegal here. If it is actually illegal to transfer assets and debt, then obviously we will have to find a legal alternative. If it is illegal (criminal) to default on a mortgage (I certainly hope it is not, but I suppose only proper legal advise will be able to tell for sure), then of course we will have to find another (legal) alternative.

If either of these things are technically legal, but people still have ethical concerns about them, then that is a different story - the pros and cons need to be weighed out in a thoughtful manner.


I certainly hope so. That seems a bit optimistic for a full recovery, but it is possible. In that case, I suppose holding out and taking a gradual loss out of my pocket over the next few years in hopes that things turn around could be the best choice. Another option to consider...

mglaze, Warsaw I know very well, the magic price here is currently 9,000 to 10,000 PLN per m2. The other thing to take into consideration is size, the most active sector of the market is 45 to 75 m2. If your apartments/flats are in smaller buildings 15-30 apartments with parking. If you bought in Centrum, Mokotow or Zolibrz close by the metro, your places will be sellable around these prices.

Krakow, I know as a visitor, although there are other people on here like seanBM, who know the Krakow market much better.

ok, here's a little detail:

#1 Mokotow 67m2 (59m2 internal) - approx 560k now? was 745k incl finishing;
#2 Bemowo 87m2 (74m2 internal) - approx 550k now? was 680k incl finishing;

Both new builds in 2008-2009, modern buildings, well more than 30 apartments in each development. Both have a parking space too.

My updates are quick estimates from a mortgage broker, not anything official from an appraiser yet, so I guess they could be a bit off.

* sorry, just edited those figures slightly..

When you speak to your person in Warsaw, ask him for the cost of an " Expertise " in each area ( BEMOWO, MOKOTOW), this will give you the average price per M2 in the area of what has been sold, it will also indicate the future expectations, it would normally cost about 5-600 PLN. It is an official document...

will be blank form
The problem is that the market is stagnant, and people are refusing to deflate their prices, as their pensions and bank accounts will vanish if prices return to normality.

Hello there,

I must confess that I was really interested about the topic, as I am a foreigner too, but in my case I chose to live in Poland and I'm not speculating. I decided to ask for a loan and, first, the banks were not so friendly when I ask for it. I have European passport (Portugal) and have permanent contact of employment in Poland. Oh! I forgot to mention that I married to a Polish lady. But, speaking about the banks, even having a good salary, they didn't give me the loan so easily. Is that something about the fact is happened in December last year, and 3 years ago, when mglaze put the request for his loan things used to be easier? 1st question banks asked me: do you have a job here? 2nd: are you a permanent resident? And lots of different questions, of course... It was different in 2007-2008? Just to clarify one small detail: My wife and I we have separation of property, so I could ask for the loan just in my name. According the reactions I could see on people's face when I was asking for the loan only in my name, seems that they are not comfortable to give loans so easily to foreigners. Am I wrong?

I was also asked if I would prefer my loan in different currency. I know almost nothing about market but for sure I was unsure about any 'attractive offer' for low rates. I decided for PLN anyway. Better not take risks at this time. So I feel that the title for this thread is not totally fair. Why 'walk away from mortgages'?

Just one last question to mglaze: is your contract so strict that you are not allowed to change your choice for currency? Because it was an option for me, if I would have decided for loan in CHF or USD or EUR.

Cheers.

Hi, yes things were quite different a couple of years ago - I won't say it was exactly "easy" to get the mortgage sorted out, but that was more because of all of the bureaucracy and paperwork that I had to go through, not because they were unwilling to lend to foreigners. I understand that things have changed a lot now, and I might have more difficulty doing the same thing today.

Yes, the notional value of the mortgage is managed in CHF from the start, and all payments are determined at a (fixed) CHF rate, which then varies in PLN. It is effectively like borrowing in CHF.

My advice: don't even think about taking a foreign currency mortgage - I certainly never will make that mistake again. Or if I do, I'll be sure to take out a hedge position with FX options to cover my exposure.

Keep us updated on how it turns out.
BTW, other countries property forums can have good general advice. Spain for instance. Although in Spain there is a major difference - banks are not allowed to chase you for the debt over and above the repossessed property selling price. So once they repossess and sell the property, thats it. Nothing else is good about buying in Spain though, its as corrupt as hell.