All markets, including real estate, go through a period of fluctuations, with a peak and trough (bottom). The property markets in the UK, Ireland, USA, are bottoming out and it is now more or less a buyers market. For many with cash, this presents a good time to buy. In Poland, the property market seems to be holding it's own at the moment, without any serious increases or decreases in real estate prices in the aggregate, or course, there may be regional differences. There are various segments of property when speaking of real estate: flats, private detached homes, farms, arable land, zoned building land. I think the best investments in property right now are in private homes, land / forest, and farms small or large. Flats will always be available and prices seem to have stablilized. Keep in mind, 'anyone' can purchase a flat in Poland, locals and foreigners alike without restrictions.
Land (arable or building), forests, and farms in excess of 1 hectare still require permission from the Polish interior of Ministry, and foreigners (non Polish citizens) cannot just come to Poland and buy such a property. The true value of these properties will come into play around the year 2012, when permissions to buy will be revoked and anyone will be able to invest in these. True supply and demand will then take place and true fair market value prices will be established. These types of properties are good to invest in before 2012.
One of our cousins (we seem to have so many!). Wanted to buy a 30sq meter new build apartment. For sale at around 180,000ZL. My mother in law who is an accountant did the maths, He would end up paying 1200zl a month for 25years. The total cost of he flat plus interest amounted to 360,000zl. (sorry I cant be more precise on figures and years, but I'm remembering what I can).
1200zl a month and he doesn't earn more than 2000zl a month, would leave him with 800zl a month for bills, food etc... not much fun.
Another friend of ours has been trying to sell her flat in Poland so she can invest in the UK market when it hits rock bottom. She has had one buyer pull out because the bank agreed a loan and then changed its mind. The poor buyer lost 10,000zl deposit.
I have heard of many people having had loan terms agreed only to be then totalled, there isn't any money to loan....? very strange...
The Polish propertymarket is a bubble, which needs to burst, the sooner the better.
WB, I bought one (in Platinum Towers) in Oct 2006 and the other (Murano) in Jul 2007. Both are central Warsaw high end so the market should (I hope) be more robust due to the somewhat lesser dependence on mortgages by the Polish 'elite'.
Maybe - luckily your various cousins will not be buyers of my properties..
The Polish propertymarket is a bubble, which needs to burst, the sooner the better.
Better for you by the sounds if it. Not for any property owner, banks or the economy for that matter. Polands property market does not have the fundamentals for a bubble, im sorry but no burst for a while.
WB, I bought one (in Platinum Towers) in Oct 2006 and the other (Murano) in Jul 2007. Both are central Warsaw high end so the market should (I hope) be more robust due to the somewhat lesser dependence on mortgages by the Polish 'elite'.
Warsaw hign end market has always been an excellent investment imo.
I find it strange that nothing has been said about the actual cost of construction?....I am sure that many on here would love to pay 2000 PLN per m2 for a new apartment and are waiting for it to drop down to this level. It will not happen. The cost of the land, the cost of the build and the developers profit will never go down to below what is reasonable. Otherwise, developing would be a waste of time. The one thing I am suprised at in the current financial situation is that the Polish government which was partly elected on the promise of providing 3 million new apartments over the next 4 years, has done sod all to help the construction industry. At the very least, I would have thought that the abolition of VAT on new builds would have helped replace the defective housing stock, helped the envoirment by making new properties more energy efficient and created additional employment for the people who want to return from the UK and Ireland.
Or, do we really want to drive along hundreds of kilometers of new roads in 2012, looking at 40 year old houses that are still unfinished.
Quite true WB. Compare Poland's situation with neighbouring Ukraine - a country which is highly corrupt at all levels and hardly has a middle class at all. Property prices in Kiev have gone up more than *10 TIMES* since 2002 leading to quite a few multi million $ flats for sale in the centre. The top earners in Kiev get around $1500 a month. Or rather, they did..
ash1972 - You see.. when you start making comparisons like that then you will begin to dig your own grave in this argument. I read somewhere that poland had the highest capital growth over any other part of Europe in the year of 2007. Krakow, doubled/tripled (i'm always a bit dubious about statistics) in as many years recently. There is 100% no doubt that this has been driven by pure investor speculation.. (some might say these are the fundamentals of a speculative bubble) I'm guessing you yourself bought these 2 properties in warsaw for the purpose of investment and based on stories of past/future capital growth in real estate in poland?
I have no doubt that in the long term (10 years) you will have a good investment on your hands. But right now you would have to have rocks in your head to buy real estate for investment purposes in poland unless you get an absolute bargain. The title of this thread demostrates the uncertainty of things at the moment. and you only have to read a couple of other threads here to know that there are people in trouble.
The developed world has seen some good times over the past decade, and there has been a lot of people with a lot of money and a great deal of optimism. It is a reality that this has all changed, at least for the moment.
Again.. I'm sorry if i sound all doom and gloom. But you can't avoid the facts. All you can do in times like these is to be extremely conservative with your money and investments and be prepared for whatever happens. Don't buy unless you get a bloody bargain.. and don't sell unless you really have to. If you are highly leveraged, then do whatever you can to pile money on to your loan (aim for being leveraged at about 65% or better).. if you borrowed in a differnt currency then talk to your bank to try and get your loan converted to zloty. Its not the end of the world.. it's just an economic downturn. Be sensible, hope for the best, but prepare for the worst and you will be right.
I think this is a time to be more accurate about TYPES of property. From this article: mamdom.com/polandproperty-polands_property_market_-_no_need_to_panic.h tm
"the property bubble will not burst. In the UK, the residential mortgage debt to GDP ratio had reached 83% by the end of 2006 (the latest fi gures available from the European Mortgage Federation), while in Poland it had grown (albeit very rapidly from a low base) to 8.3%. Total outstanding mortgage lending in Poland €41 billion, compared to €1,584 billion in the UK"
"Many developers who have built expensive luxury apartments in prime city centre locations are left with unsold units, as the demand for this type of property among rich Poles had been overestimated."
In other words smaller apartments are still continuing to do well. The large numbers of unsold units are the big stuff that should never have been built. It will take a while for that to work through the system and while it does developers will not be starting new projects. The result will be a shortage of supply in future years which will cause prices to rise again. Nothing new - happens in the UK everytime prices drop.
When all is said and done having a look at this page: oferty.net/statystyki/122008.php
There is not much here, for Warsaw anyway, to suggest prices are rising or falling. Seems this city is holding steady despite everyone assuming prices are falling due to oversupply.
Ozdan, I pretty much agree with most of what you say. We are in a downturn - and Poland will NOT be immune by any means - but, as someone pointed out on another thread, Poland has a strong 'backbone' and will at worst suffer a few broken ribs.
Do you know what proportion of Poles owns investment properties? My guess is its tiny compared to the UK, US or Ireland. The huge increase in city centre apartments can be attributed to the rapid increase in salaries of the upper middle class. Poorer Poles have, unfortunately, not had the same increases - these were the people taking out mortgages they couldn't afford - and we're now going to see the large number of developments aimed at them substantially fall in price.
So you think now is the time to be extremely conservative? Many would disagree and say now (or a few months from now) is the time to be extremely aggressive and buy when everyone else is temporarily broke. That is, buy the best at the lowest price you can haggle.
My point with Ukraine was that it's really fallen off the edge due to a complete disconnection from reality. Poland is not in this situation.
elected on the promise of providing 3 million new apartments over the next 4 years,
All politicians lie. Didn't Tony Blare promise something similar?
Compare Poland's situation with neighbouring Ukraine
This is not a good comparison, at all. I know people who have invested in building offices in Kiev at 15% yearly returns. They were lucky to get out with their initial investment, basically the corruption was too bad. One of the rules of capitalism "High risk can equal high profit" But there are many more reasons why you can't really compare the two.
There is not much here, for Warsaw anyway, to suggest prices are rising or falling.
Are people still moving in to Warsaw i.e. Is the population of Warsaw still increasing?.
Be sensible, hope for the best, but prepare for the worst and you will be right.
I am usually sceptical of people on the other side of the planet giving advise but I have to hand it to you. I agree with ash1972, within the next year we will be able to see more effects and if there is a down turn in the market, it is time to buy.
Are people still moving in to Warsaw i.e. Is the population of Warsaw still increasing?
In the last 6 months? Who knows. Between now and 2012? I think that's a resounding yes. The population of Warsaw will increase substantially for a whole range of reasons, first and foremost because it's where the highly paid jobs are being and will continue to be created.
I think this is a time to be more accurate about TYPES of property.
This is exactly what I have stressed in my previous post..the property "type". One must identify within the Polish real estate market, which category of property is a good invesment, rather than grouping all properties into one basket.
- Flats - Houses - Industrial Structures - Land (agricultural / arable) - Land (industrial) - Land (Residential) - Land (Forest) - Farms (small or large)
The key is, flats can be purchased and sold by anyone. So, the prices you see today are well reflected. However, other types of property still haven't had 'true' supply and demand factored into it. Hence, an objective market price still has not been determined between buyers and sellers. This should prove to be an interesting observation when 2012 comes along. Even more important, by that time, most world economies will have partially or fully recovered from recession. Timing is essential in this regard.
Ash - I don't disagree with you that the time to buy is when others are selling. It is in times like these that some people make their fortunes. But I would be waiting it out, at least till mid next year. It won't hurt to keep an eye out for opportunities, but if it were me i would be seeing where this all ends goes for a bit before committing to further debt. I noticed on another thread you mentioned you are considering selling one of your properties to minimize debt. Which I would think is more on the conservative than aggressive side of behaviour.. and a bit of a contradiction.
With regards to ratios between poles and foreigners owning investment properties i would think it would make more sense to look at the ratio between foreigners and poles who bought over the boom period when prices were driven up so dramatically. I don't have the answer to this..
I noticed on another thread you mentioned you are considering selling one of your properties to minimize debt. Which I would think is more on the conservative than aggressive side of behaviour.. and a bit of a contradiction
That's an option, sure. Remember, cashflow management is a different beast entirely from capital gains.
In fact Ozdan it's well worth pointing out the difference between strategy and gambling. A good strategy will help protect you from the consequences of your view not working out.
My *view* is that by 2012 high end central Warsaw flats will achieve an average annual capital appreciation of around 10%. Does this mean I should sell everything I own, get as much mortgage debt as possible and pile into Warsaw property? Clearly not. For a start I have other investments that make much more than 10% annually. And for seconds, diversification by definition smooths out returns long term so that hopefully some things are making you money at exactly the time that others are not.
I don't doubt your prediction for 2012. And yes.. a good strategy is essential. But a good strategy is one worth sticking to. And I guess I was just assuming that you had a longer term strategy in mind when you bought your investment properties in warsaw rather than sell one of them within 1 1/2 to 2 years to solve a cash flow problem.
Back to the topic of this forum "House prices in Poland to drop more or rise again?". Long term they will rise... short term they will drop. (my guess, not yet actual fact)
The point I am trying to make is that there are a lot of people feeling the pinch right now.. And I am just assuming you are included in this given your cash flow concerns.
I really have no idea what your situation is other than from the basic information you have posted on this forum. As I am sure you would agree.. you have to ask yourself why would someone be saying "now is the time to buy" when in fact they themselves are considering selling.
My *view* is that by 2012 high end central Warsaw flats will achieve an average annual capital appreciation of around 10%.
Yes as the story goes a fool and his money.hmmm. annual capital appreciation of 10%?? lol, pull the other one. The world is set for the greatest downturn on record, ash1972 my friend do some hard research!
Bolek, do you think Poland's economy will shrink from now till 2012? Then it's you who needs to do some research.
It was always my intention to use profits (whatever they may now be) from the first property to pay for the second. That just sounds like common sense to me. I could afford to own both outright BUT what's the point when you can have 50% of your money in one place and the other 50% in something else?
Polands economy will continue to grow up to 2012, and then quite likely accelerate after that, due to European integration funds and multi-nationals looking for a central European base relocating there. Europe and the western world may be in a recession- Poland too, but it will probably weather the storm better.
There seems to be a lot of people talking about a magic number (2012). I'm not sure if it is because of a football game or something to do with a Euro (not football) target? Is there any substance to this obsession with 2012?
Also, there is a lot of talk with people saying "polands economy is strong!" and "polands economy will continue to grow" without any reasoning as to why.
I'm just wondering what peoples thoughts are on why polands economy will grow? What happens when half or all of polands major export partners fail? What will happen when investors from other parts of europe start minimising their investments within poland to solve cash flow problems? What is going to happen to unemployment when there is a flood of poles returning from the UK because they can no longer find work over there only to find that there aren't really any jobs for them back home? What is it that will keep poland ticking along when the rest of europe is tumbling?
Bolek, do you think Poland's economy will shrink from now till 2012? Then it's you who needs to do some research.
Nothing will happen in Poland till such time as workers receive similar income to those of other EU members, where pensions have some value. It is hard to see this being realised. Take Japan and Germany, both in recession, they are both highly industrialised nations, Japan has been in recession for over 10years. What has Poland to offer??? I suggest very little, it still has to battle its huge pollution problem. It lacks good roads, hotels and common spirit amongst its own people to make it happen.
Another wild card is deflation or inflation? Its only a guessing game. Time will tell
Both of you seem to be forgetting that Poland's growth will be internally driven. There is a EUR 70bn odd cashpile earmarked for this. This amount wouldn't go terribly far in a Western country - such as Britain, where it wouldn't even make a dent in the screwed up banking system - but will in Poland.
And yes, ordinary Polish workers do deserve a better deal than they're getting. This, however, doesn't concern me directly as the property I've bought is for the top 1% of the population. These people, the instigators of economic change, are doing very well and will continue to.
Comparing Japan and Germany with Poland is ridiculous. Both are advanced post industrial nations with very expensive welfare systems to pay for. Poland has a huge amount of domestic development to do before it gets to the level of Southern Europe. The very fact that it currently lacks some of the polish (good roads, top hotels) that Western nations have show that this area will be a significant driver of growth.
Both of you seem to be forgetting that Poland's growth will be internally driven.
I don't think i've ever heard this before... Again,I don't see any backing for these predictions. How wil polands growth be internally driven?
as the property I've bought is for the top 1% of the population.
A lot of what you are saying seems to be in order to justify your own personal investment decisions. The upper class of Warsaw or top 1% are not immue to any negative effects from a down turn. Investing in luxury properties in warsaw is not a get out of jail free card.
Theres an old saying.. "if you have nothing.. then you have nothing to lose".. the opposite goes for those who have. As we are seeing now in australia.. higher ends of the property market are probably the hardest hit with discounts of up to 30% in some of the most prestigious locations in australia. No-one is buying... and people who have had money in the boom time have invested heavily. Now they are losing money and are forced to scale down to reduce debt. This includes luxury real estate.
Before you start having a go at me for comparing apples with oranges.. I understand that Australia is not poland... But you have to stop thinking that poland is somehow different to the other economies of the world which are driven by capitalism. Also.. just because poland has a long way to go with its public infrastructure doesn't mean this will automatically drive growth.
A lot of what you are saying seems to be in order to justify your own personal investment decisions.
Very true, a lot of novice investors use this forum to seek reassurance in what they have done, seasoned investors just move on and don't worry about it (sorry Ash)
The truth remains that making a quick buck in Poland ceased some 10 years ago and a lot of skill is now required to invest successfully in Poland.
A lot of people who invested in flats and apartments in recent time will be reaching out for a bottle of vodka to control there anxieties.
One thing is certain the current economic crisis that we are experiencing will raise its ugly head in Poland in some form or other.
I suggest that the average Pole will find it very difficult to obtain a bank loan to fund the already overprice real estate in Poland. Lets wait and see!
The truth remains that making a quick buck in Poland ceased some 10 years ago
I wouldn't say thats entirely true, there were quick bucks to be made more recently than that if you knew the market and knew people that could make things happen quickly
Very true, what I was trying to say was that any fool could make a quick dollar in Poland some 10 years without trying, there is always money to be make for the smart investor, even in real estate, my advice would be to keep away from country properties and high rise developments, that is at the moment.
Anyone that bought property after Jan 2007 is now in the negative. If you used sterling or the Euro as a base currency you are in big problems. Property in Warszawa this year (2009) will fall by 12-15%/ But the main problem is the zloty which we could see at Euro 1 to Plz 5 by the end of the first quarter of 2009. If you are looking to speculate on property wait until Q2 2010 there will be some good buys on the market.
Sorry ash, I didn't realise your from the higher economic level of person living in Poland, lets hope your not one of the ones to be king hit as a result the global economic crisis.
I'm just a average sh/t head trying to make ends meet. (don't bother telling me that Poland will not effected) My experience tells me that in a economic downturn the higher end of the property market suffers the most.
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