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Poland: Poland

Guide to the Risk and Opportunity Ratings

At the end of each country profile, we have given a risk rating and an opportunity rating. These ratings are a summary of our analysis indicating the levels of risk when investing in a market and the level of opportunity to profit from it.

The ratings themselves are simple. Both work on a scale of one to five. The opportunity rating is indicated by the $ symbol. A single $ equals a low opportunity whilst 5 of them ($ $ $ $ $) equals the highest opportunity ranking.

For risk we have used the * symbol. A ranking of * equals a low risk rating whilst * * * * * equals a high risk rating.

Introduction

Poland arguably attracts more pure investment buyers from Ireland, the UK and Germany than any other country. The largest and best known of the 2004 EU entrants, the difference between Poland and neighbouring Germany was a gulf which buyers expected EU entry to close.

The optimism has been partially justified: economic growth is over 5% and property prices continue to rise at a steady 10% per annum in the major cities. Polish families are expecting better quality residential property and the level of home ownership is rising steadily, increasing from 48% in 1998 to 55% in 2003.

There are difficulties: unattractive grey Soviet apartment blocks still make up much of the housing stock and some new construction doesn’t live up to expectations.

The buoyant market is encouraging developers to build, and Poland’s major cities are now ringed with inexpensive housing. The balance between supply and demand may be shifting towards over-supply of affordable residential property. Exclusive high quality developments are therefore believed to be the best investment.

Is this a good place to buy?

In the 2006 study of potential capital appreciation over the next ten years conducted on behalf of the Channel Four television programme “A Place in the Sun”, Poland was placed second after Romania. The firm of accountants commissioned by the programme concluded that Polish real estate could offer 393% returns over the next ten years. Poland does present a good opportunity, but this level of growth is unrealistic.

According to the “Emerging Trends in Real Estate Europe” Report released jointly by the Urban Land Institute and PriceWaterhouseCoopers, in 2006 Poland should show the largest increase in residential sales across Europe. With an increasingly robust economy and within three hours flight of London, buyers can keep a close eye on their investments.

The size and economic clout of Poland gave the country the highest profile of the 2004 EU entrants. Buyers who invested in 2004 have not been disappointed. With close links to neighbouring Germany, Poland is being successfully integrated into the EU. The Polish are getting richer, and property prices look set for a sustained rise.

There is no doubt that Poland is taken very seriously by the educated investors. With residential yields in cities up to 6%, and as one of the few Eastern European markets to have dedicated property funds, whether Poland can still be classed as emerging is debatable.

A construction boom has spread from Warsaw and Krakow to regional centres such as Gdansk and Poznan. A high proportion of rural homes may still lack some of the most basic amenities, but Poland’s cities are now ringed with new-build developments catering to young professionals and Poland’s growing middle classes. Poland is also set to receive close to $13.5 billion to spend on infrastructure and economic growth is strong.

The property market in the cities remains buoyant and off-plan developments often sell out before building begins. Another sign of a growing market is the increase in available credit facilities. It is estimated that lending is now a part of around a quarter of transactions and interest rates have fallen.

The mortgage boom has been led by borrowing in foreign currencies as mortgages taken in zlotys have a nasty habit of becoming relatively more expensive. The interest rate on a loan in Swiss francs is as low as 3.1%, or 5% in dollar loans.

Price history

According to the RICS European Housing Review, prices rose by 10% in 2004. In 2002 and 2003 appreciation was closer to 20%. More than any other country Poland benefited from outside investment. Apartments in historic buildings in the very centre of Warsaw can now cost 200,000 euros (£140,000/$240,000), although studio flats designed for young professionals can be as little as 60,000 euros (£42,000/$73,000). Three bedroom houses in the suburbs cost about 140,000 euros rising to 300,000 euros for sizeable properties in very good locations.

More pages

Page 1: Guide to the Risk and Opportunity Ratings
Page 2: Buyers this market will appeal to
Page 3: Key risks and opportunities

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