Poland Property Market Overview

There was a lull in the Polish property market between 2002-2003 but confidence and investment brought by membership of the EU in 2004 propelled Poland to have some of the highest property price growth rates in the whole of Europe (along with Denmark).

The reforms put in place by the Polish government to enable it to join the EU lead to a huge increase in FDI which reduced unemployment, raised wages and boosted confidence but improved local infrastructure as well.

At the same time Poland had relatively low property prices and mortgage products saw significant improvements in LTV coupled with falling interest rates.

The increasing number of Poles with money in their pockets with the confidence to spend increased and with property prices low affordability was very high.

Due to this high demand property prices rose dramatically, the effect was further compounded by the restricted supply caused by an archaic planning system and building cut backs after a poor year in 2003 for developers.

Rental yields back in 2004 were very healthy (of the order of 7-8%) but these yields have since been compressed significantly with a stagnant rental market and large prices increases as everyone who could afford their own property tried to buy one.

The strong FDI and economic potential of Poland means it is a good long low risk term bet for future property price growth, combined with the fact that foreigners can now get good mortgage finance of 80-100% LTV, 30-40 year terms and interest rates around 4-7% (depending on the currency borrowed).

2007 saw price growth slow down significantly as affordability became squeezed.

By 2008 prices had already started to reserve mainly due to the unaffordable prices and the market being oversupplied in some areas of the major cities. Conversely this has helped the rental market a little, but this too is somewhat oversupplied in the new developments.

The major cities in Poland still offer great long term low risk investment locations due to their solid fundamentals. Some of Poland’s third tier cities may have slightly higher growth in the short term but ultimately are more risky and more hassle which does not make it worth it.

Through the first part of 2009 we see prices continuing to soften in Poland but start your research now as there will be inevitably be buying opportunities in what is overall a good medium term market.

Overall 2009 will be a year of picking up bargains in good low risk locations in Poland’s key major cities and positioning oneself well for medium term growth once the global economy sorts itself out.