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How the Poland property market became a HUGE bubble


Wroclaw Boy
11 Oct 2013 #1
Most of us here are familier with the prices associated with Polish property over the past 10 years or so. Now, im going to be failry vague as im just writing this from memory, however.....

I think its fair to say that during the property boom times many inner city developments of houses and flats experienced 200% capital appreciation within a 3 year time scale, mainly betwen the years of 2004 - 2008. So if an apartment was valued and selling for 4000 PLN / m2 in 2004/2005 they were still valued and indeed selling at 12,000 PLN / m2 in 2007/2008. Then we had a bit of a crash.

I dont know about anybody else but ive never witnessed anything so absured, its absolutely rediculous that a country such as Poland could become so over inflated in such a short period of time.

At the moment we are in a period of stagnation which again is pretty silly considering theyre still way over priced but thats another thread. What im concerned with is how did the market become so inflated?
SeanBM 35 | 5,808
11 Oct 2013 #2
The main Factor is the 2004 enlargement of the European Union to include Poland, it pretty much changed everything.

Confidence in the country skyrocketed, I came over a few years before 2004, I just came from Ireland and it was obvious to me that Poland was going to go through the same metamorphosis.

Two million Polish people emigrated and were sending billions back with the idea to buy property because they had the romantic idea of returning some day (I say romantic because most didn't).

Here is a great website showing the motorways and the year in which they were built.
stadiony.klszarak.org/scc_a_s.swf

In 2004, Poland received €435 million1 from the EU in structural funding, while in 2007 the figure was more than €3.1 billion and a further budget of €347 billion for 2007-13.

It became a fantastic place to invest, labour was comparatively cheap highly educated, willing and able, it's a superb geographic location (in times of peace), with emigration the unemployment rate went down and wages went up and with the E.U 'safety net' it was booming.

Also speculators were licking their lips.

In my opinion the economic crises happened at a good time for Poland, if it didn't happen when it did, it would have went down the same road as Ireland (remember Tusk's words "we are the new Ireland" unsurprisingly he doesn't say that anymore.

There is no doubt in my mind that Poland would have eventually made all these advancements by herself but the E.U. was the catalyst and with that momentum catapulted Poland forward with the knock on effect of the huge price increases we all saw.
OP Wroclaw Boy
12 Oct 2013 #3
The main Factor is the 2004 enlargement of the European Union to include Poland, it pretty much changed everything.

Also speculators were licking their lips.

These two go hand in hand and one of the main reasons i think for the property explosion. I can remember walking around the cities thinking why are there so many banks in Poland, there seemed to be an alarming amount of them and still is today. Poland was fresh pickings and the the specualtors were in for the kill big time.

It was a fast paced ride with property prices rising by the month, everybody was saying that Poland was the new Ireland (Ireland was booming at the time), even i used to buy into that BS, i think we all did. The investors were buying, the hedge fundes were investing, high net worth individuals and corporate schemes were slapping down 10-20% deposits and taking entire phases of new developments off plan.

The CHF loan what a complete gamble that turned out to be.

Its amusing when a market crashes that all the people with vested interests call it a market correction. Looking back the property explosion in Poland was absolutely absured and still is.
SeanBM 35 | 5,808
12 Oct 2013 #4
Looking back the property explosion in Poland was absolutely absured and still is.

Poland was economically held back because of communism, the point of the E.U. was to make all the countries economically similar so that the Inner Six could expand their economic territory as a long term strategy and have more consumers to sell their products to.

en.wikipedia.org/wiki/Inner_Six

People often talk about the benefit to the accession countries but we must remember that it was them who needed us to join.

If you look at it as a business strategy (which everyone should), you can only sell to people who have money, it was not altruistism which people seem to be lead to believe.
grubas 12 | 1,391
12 Oct 2013 #5
People often talk about the benefit to the accession countries but we must remember that it was them who needed us to join.

I am reading it for the 10th time and still don't understand.Who needed who again?

it was not altruistism which people seem to be lead to believe.

Altruism?Right.We (the Poles) have been colonized .Accidentally I just finished listening to R.Kapuscinski "Szachinszach" audio book (it's on YT) and it felt as if it was written about Poland.
SeanBM 35 | 5,808
12 Oct 2013 #6
Who needed who again?

It was

EU expansion

Just to clarify, I am very much for the E.U.....so far.

Altruism?

As I said, it was not altruism, so you are definitely arguing with the wrong person.

Accidentally I just finished listening to R.Kapuscinski "Szachinszach" audio book (it's on YT)

He was a writter, perhaps you can remember which book you listened to and what valid points it made on the topic?
grubas 12 | 1,391
12 Oct 2013 #7
so you are definitely arguing with the wrong person.

I am not arguing Sean.

perhaps you can remember which book you listened to and what valid points it made on the topic?

"Szachinszach" about Reza Pahlavi's Iran and causes of Islamic Revolution.

As I said, it was not altruism, so you are definitely arguing with the wrong person.

Ok,I was kind of arguing as I thought you were saying that we in the East needed West to colonize us.
OP Wroclaw Boy
12 Oct 2013 #8
If you look at it as a business strategy (which everyone should), you can only sell to people who have money

A business proposition in terms of expanding the EU's financial global muscle so they can compete with other super powers such as the US, Russia and other new emerging Asian powers is one thing, but pricing the average Pole out of the housing market, which is a fundamental neccesity for happy living is completely another cup of tea.

I fail to see how the property explosion witnessed in Poland can be a positive thing for the EU or indeed for the average Polish person.
SeanBM 35 | 5,808
12 Oct 2013 #9
A business proposition in terms of expanding the EU's financial global muscle so they can compete with other super powers such as the US, Russia and other new emerging Asian powers is one thing

I believe this will eventually benefit all E.U. countries for that exact reason just because it was beneficial for the original six does not necessarily mean it is not a symbiotic relationship and driven by everybody's self interest (which I think is a better reason than any pretense of altruism).

pricing the average Pole out of the housing market

I'm not exactly sure what you mean could you elaborate?
Comparatively very few foreigners live here so speculators are not the real issue now and most first time buyers in any country can't buy in the major cities for supply and demand reasons.

which is a fundamental necessity for happy living is completely another cup of tea.

I am not going to argue the elusiveness of happiness but first time average Polish people can afford to get on the property ladder in the urban areas but I hate (and I do not use that word lightly) that both parents must work (I feel like I am getting off topic here but it needed a mention).

Polish people have, for their recent history, not trusted the system (and banks) because of their history and it was totally impossible before the E.U. for the average Pole to buy anything with such high unemployment (45% in some urban areas).

I fail to see how the property explosion witnessed in Poland can be a positive thing for the EU or indeed for the average Polish person.

The first casualty of War is Truth.

The average anywho was never given a second thought. it's a business.
Armani, Christian Dior, Gucci, Versace don't think about the possible "positive effect" their business has on the manufacturers and distributors, it's all about the consumer. (I recommend No Logo en.wikipedia.org/wiki/No_Logo)

So far I believe it is better for us E.U. members to be together than not to be.

I was shocked and indignant at the Nobel Peace Prize Awarded To The European Union for 2012 (listen to the sighs of objection the second it is announced and how he explains it).

I believe that mutually beneficial business is the way forward for peace.

youtube.com/watch?v=pOQqBZul1J4

We (the Poles) have been colonized

we in the East needed West to colonize us.

I don't know what time it is where you are in the U.S.A but it's a Saturday night there too and I am not looking for a fight as I find this particular topic interesting.

But calling it a colonisation is wrong on practically every level and really does not help me understand the situation but your input is good because I see the E.U. in some ways very much like the U.S.

Hopefully we too will have federal law and state law, so that our people can better express their democratic opinions (state law) while combating organised crime (federal law or a better INTERPOL?).
OP Wroclaw Boy
13 Oct 2013 #10
I believe this will eventually benefit all E.U. countries for that exact reason

Thats the idea hey

I'm not exactly sure what you mean could you elaborate?

What i meant was that a flat which used to cost 2000, PLN / m2 in the city is now about 5,000 PLN / m2 and the wages haven't increased in line, so many Poles have been priced out of the market as a direct result of the crazy property prices.

I am not going to argue the elusivenessness of happiness

Good, i probably should have used the word necessity anyway.
peterweg 36 | 2,317
13 Oct 2013 #11
so many Poles have been priced out of the market as a direct result of the crazy property prices.

94% of Poles own their property outright of have subsidised accommodation, so its a minority who have been priced out. Admittedly its a problem for them, but Poland is significantly different in that respect.

I suppose you are one who was 'priced out' of Poland.
Meathead 5 | 470
14 Oct 2013 #12
So far I believe it is better for us E.U. members to be together than not to be.

Oh yeah? Norway and the Swiss are thriving. Portugal, Italy, Ireland, Spain and Greece are suffering greatly due to being handcuffed by the strong Euro. England would be better off nurturing it's common market. Sweden, Denmark, Iceland and Poland have yet to accept the Euro. Not much evidence for your assertion.
peterweg 36 | 2,317
14 Oct 2013 #13
are suffering greatly due to being handcuffed by the strong Euro

Switzerland and Norway have unique economies. Norways based on large Oil/gas/ore/hydroelectric/seafood resources and Switzerland's based on illegal banking.

The PIIGS had **** economies and weak currencies before they joined the Euro which give them low interest rates unsuitable for their economies. They trashed themselves with cheap money.

None of the PIIGS (or any Euro economy) want to leave the Euro, even now the benefits outweigh the current pain

Not much evidence for your assertion.

Not a single country has made any attempt to leave the Euro and one country has joined after the crisis.
delphiandomine 83 | 17,914
14 Oct 2013 #14
the Swiss are thriving

That's why the Swiss had to spend a considerable amount of money pegging the Franc to the Euro because their exports were being destroyed by the strength of the Franc, wasn't it?
OP Wroclaw Boy
14 Oct 2013 #15
94% of Poles own their property outright of have subsidised accommodation

Proof please, or is this another weg fact? last time i checked a considerable amount of younger Poles who should be on the property ladder were actually living with their parents. Whats the unemployment statisitics for Poland? do these people also own their homes outright or have subsidised accommodation?

Whats subsidised accommodation anyway?

I suppose you are one who was 'priced out' of Poland.

You suppose wrong Weg, i moved to Poland in 2005 and had and still have considerable property investments there.
Harry
14 Oct 2013 #16
last time i checked a considerable amount of younger Poles who should be on the property ladder were actually living with their parents.

Isn't living with parents the same as having subsidised accommodation?
OP Wroclaw Boy
14 Oct 2013 #17
I would class that as living with parents.

Boy who lives with parents meets girl, girl asks do you have your own place? Boy says uhhmmmmmm, no i have subsidised accommodation.
delphiandomine 83 | 17,914
14 Oct 2013 #18
last time i checked a considerable amount of younger Poles who should be on the property ladder were actually living with their parents.

What's interesting with this is that many people prefer to live with their parents rather than getting onto the property market with a smaller property than is desirable - I know several people who are waiting until they have enough money for a house or a big flat rather than trading their way up.

Strange mentality to me.
cms 9 | 1,271
14 Oct 2013 #19
Seems to have settled down now a bit - further falls in some markets like Gdansk and Wroclaw but Warsaw and other towns stabilizing. So doomsayers including myself were wrong. But it will take many years for real growth to return.

I think the main reason for the boom was that people expected Polish salaries to rise to Western European levels much sooner and that this would be more or less an automatic consequence of joining the EU - if you look back at this forum to 2008 you will find cheerleaders comparing property prices to Stockholm or Amsterdam - prosperous towns where building land is severely restricted by water ! Spain and Ireland were also seen as templates.

In fact at current rates of growth then Poland could outgrow France (the median country in "Old Europe") by 3% per year and it would still take 30 years to catch up with them. In addition the driver of growth has to be something other than cheap labor which can be readily used for manufacturing - need to be big developments in education and in the culture of investment.
OP Wroclaw Boy
14 Oct 2013 #20
if you look back at this forum to 2008 you will find cheerleaders comparing property prices to Stockholm or Amsterdam

LOL back in the day nobody had a bad word to say about Poland, every mofo was convincing themselves it was the best thing since sliced bread. Myself included.
SeanBM 35 | 5,808
14 Oct 2013 #21
Oh yeah? Norway and the Swiss are thriving.

So what? Should we drop the whole E.U. idea because someone else is doing well?

Portugal, Italy, Ireland, Spain and Greece are suffering greatly due to being handcuffed by the strong Euro.

That is not what messed up those countries economically, the idea of the Euro zone is different, to create a single stable currency.

Not much evidence for your assertion.

You have not read what I said and your argument is wrong.

Here is what I am saying:

1. E.U. is at peace with itself and deserves the Nobel prize for that (see above).

2. Do you remember what it was like before the E.U.? The unemployment rate and most importantly for me, there was no real freedom of movement.

The next generation are going to grow up and take the Schengen area for granted, as if it has always been there and personally I think that is brilliant.

You're in the U.S. imagine you had to get a visa to travel from state to state, imagine how stifling that would be for the people and for business.

3. Europe are a group of tiny countries, it's only a matter of time before we have to unite our economies so we can play with the big boys or be dependent on other larger economies and we'd have no real clout, no real bargaining power.

last time i checked a considerable amount of younger Poles who should be on the property ladder were actually living with their parents.

I think think this was worse before 2004.

In fact at current rates of growth then Poland could outgrow France (the median country in "Old Europe") by 3% per year and it would still take 30 years to catch up with them.

I don't get your math, so if Poland is growing more than France it doesn't really mean anything as they did not start off on the same level, Communism held Poland back.

has to be something other than cheap labor which can be readily used for manufacturing - need to be big developments in education and in the culture of investment.

I think this is what the E.U. as a whole must do, research and development all the way!

LOL back in the day nobody had a bad word to say about Poland, every mofo was convincing themselves it was the best thing since sliced bread. Myself included.

Wasn't it the same all over? I mean the one good thing about the economic crises in Ireland is that I don't have to listen to idiots telling me how much they thought their property increased in value this week....
peterweg 36 | 2,317
14 Oct 2013 #22
Its in the housing bubble thread. Why did you create another thread on the same subject, BTW. Although I'm not going to dig it out from that long thread - it has been well discussed.

In fact at current rates of growth then Poland could outgrow France (the median country in "Old Europe") by 3% per year and it would still take 30 years to catch up with them

Rubbish. Its 17 years(Don't tell me you don't still understand compound calculations ?)

France's GDP PPP per capita according to the world bank en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_ per_capita

47 Poland 22,162 2012
22 France 36,104 2012

So Frances GDP is currently 1.63 x Poland per capita and it will take 17 years to hit 1.65

However, currency appreciation could add 25% in one year. Guesswork, however.

further falls in some markets like Gdansk and Wroclaw but Warsaw and other towns stabilizing.

What other towns are stabilizing? Krakow is still falling as are all those and they are the most likely to rise.

Having said that 2014 should be stable, if not rising, the EU economies are starting to recover.
grubas 12 | 1,391
14 Oct 2013 #23
2. Do you remember what it was like before the E.U.? The unemployment rate and most importantly for me, there was no real freedom of movement.
The next generation are going to grow up and take the Schengen area for granted, as if it has always been there and personally I think that is brilliant.

I think it was a mistake on the side of Eastern European countries to join EU.We should have kept RWPG even at the cost of some political concessions towards Russia.Fueled by cheap Russian oil and natural resources from Syberia Eastern economies would be booming.It would be interesting to see competition of two economic blocks.
cms 9 | 1,271
14 Oct 2013 #24
Yes i understand compound growth very well and i was looking at base gdp per capita not ppp which would make no sense in the context of the rest of my mail. On that basis the starting figure for poland is 13k usd and for france 39k. So it would in fact take more than 30'years.

Towns that are stabilizing - well i had a brief look at reas report and thought poznan and lodz were, but maybe my memorymis failing me.
SeanBM 35 | 5,808
14 Oct 2013 #25
We should have kept RWPG even at the cost of some political concessions towards Russia.Fueled by cheap Russian oil and natural resources from Syberia Eastern economies would be booming.

Like where, Ukraine is now?

I don't think it would have worked out.
Meathead 5 | 470
15 Oct 2013 #26
Not a single country has made any attempt to leave the Euro and one country has joined after the crisis.

The European elite like the idea but have the people voted?

That's why the Swiss had to spend a considerable amount of money pegging the Franc to the Euro because their exports were being destroyed by the strength of the Franc, wasn't it?

Your question makes my point. The Swiss have pegged their franc to the Euro so that it won't appreciate and affect their exports and imports. They're doing it to protect their economy. Greece, Spain and Italy do not have the same luxury as they are tied to the Euro, thus 50% youth unemployment.
InWroclaw 89 | 1,915
21 Oct 2013 #27
Good thread, great question.

A small (15m2) studio flat on Powstancow in a block was circa 40-50 thousand PLN in 2001. The same one, even now in this supposed stagnation period, would probably be 160-200K PLN.

Are people making a lot of money on property, hence the very expensive cars I see all over the place? Or are they successful business people in other sectors, plain and simple? Because I see so many new and expensive cars here, it's like they're giving them away for free.

The other explanation is the same as the UK: people have used their property as a loan security, and withdrawn money to buy these cars with that money. All over the place, huge Mitsubishis, Audis and Beemers. Yet wages are 40K PLN per annum??!
Avalon 4 | 1,068
28 Oct 2013 #28
Some doomsayers including myself were wrong. But it will take many years for real growth to return.

Maybe not.

wbj.pl/article-64179-housing-rebound-begins-to-materielize.html
peterweg 36 | 2,317
28 Oct 2013 #29
Just about bang on target, 5 years after the crash prices start to rise. The capital leads, naturally.

It will be a slow recovery. Wages have risen 20% and prices fallen even more so we must be at the balance point.
Steveramsfan 2 | 306
28 Oct 2013 #30
I just bought a new build flat near the centre of Lodz at 4000pln per Sq m.

So prices are right back at 2004 prices in Lodz.


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