The Polish Real Estate Market
The Polish real estate market is becoming increasingly prominent among global investors. Some of the factors that entice both foreign and domestic investors to invest in real estate in Poland include a stable and developed market, a rising economy, competitive capitalization rates, and low interest rates as compared to Western European countries. Other significant factors include ongoing infrastructure proliferation, the development of emerging technology, e-commerce expansion, the advent of shared services centers, relatively low inflation, an increase in the rate of foreign direct investment inflows, and more consistent tax and legal regulations. A high flexibility degree among various workers (visible during the introduction of new products and new HR, financial, and industrial management methods), relatively low labour costs, and a vast pool of university graduates and highly-skilled personnel have also influenced investment decisions in the Polish real estate market. Less bureaucracy, more efficient organizational procedures and consistency and creativity among many Polish citizens have also contributed to the high volume of transactions in the real estate market, amounting to EUR 4 billion, making Poland the leader in Southern and Central Europe regarding the value of transactions on the real estate market.
House Prices
With new housing subsidy programs, constrained supply, and low-interest rates, the demand for housing in Poland has continued to rise over the years. Shockingly, increases in housing price have been minimal. According to surveys conducted by the Central Bank of Poland and Narodowy Bank Polski (NBP), the prices of housing rose slightly in 2016. The average price of flats in the seven big cities of Poland (Wrocław, Poznań, Łódź, Warsaw, Kraków, Gdynia, and Gdańsk) rose by 0.3 percent (1.3 percent inflation-adjusted) during the first quarter of 2016. The prices increased by 0.1 percent (0.8 percent inflation-adjusted) during the last quarter (Global Property Guide, 2016).
In Warsaw, the Polish capital city, the average housing price increased by 0.6 percent during the first quarter of 2016. Bydgoszcz recorded the highest price increase of 5.2 percent followed by Gdańsk which registered 3.5 percent. Other cities which recorded minimal housing prices include Olsztyn (0.1%), Łódź (0.4%), Wrocław (0.6%), Opole (1.1%), Gdynia (1.3%), Szczecin (1.4%), Białystok (1.5%), Poznań (1.5%), and Lublin (2%). The cities which recorded a decline in house price include Katowice (0.2%), Kielce (-0.7%), Rzeszów (-0.8%), Zielona Góra (-0.9%), and Kraków (2.9%). The recent studies carried out by NPB show that the most expensive housing in Poland is in Warsaw (EUR 1,975 per square meter) followed by Kraków (EUR 1,558 per square meter), Gdynia (EUR 1,462 per square meter), and Gdańsk (EUR 1,413 per square meter). The cheapest houses are in Zielona Góra (EUR 786 per square meter) (Global Property Guide, 2016).
Ownership of Property by Foreigners
The majority of the luxury homes in Poland belong to the wealthy Poles, however, the number of foreign nationals purchasing high-end houses in the country, more so in the capital city, has risen over the last couple of years. Most of these foreign buyers are citizens of Western Europe countries, Dubai, and the United States who tend to have some connections with Poland, for instance, their families reside in the country or have a Polish ancestry. The government has put in place some restrictions for foreigners who intend to purchase a property such as a single-family home in Poland. It requires them to apply for the permit to acquire property from the Ministry of the Interior and Administration. Poles and citizens of countries that are members of the European Union do not face such restrictions. Buyers who intend to purchase previously owned or new apartments do not face such limitations, as well. Once a foreign buyer has put all the required documents in place, it takes about two months for the permit to be ready. Purchasers usually cover various costs involved in real estate transactions and the costs vary depending on the size or whether the property the buyer targets is previously owned or new. The tax structure which applies to the acquisition of relatively smaller apartments or houses is different from the tax structure that applies to the purchase of homes that cover more than 3,230 square feet of space or apartments that cover more than 1,500 square feet. Notaries usually handle transactions below $1 million, while property owners and purchasers involve lawyers in transactions of higher value (Popescu, 2016).
Property Ownership in the Capital City
The fastest-growing real estate market in Poland is within Warsaw, the capital city. This rapid growth rate has mainly been due to the fast population growth rate within the city. The most recent surveys indicate that about 3 million individuals inhabit this metropolitan area. The high level of population growth has made the costs of property in this city be the highest in the country. The average prices of property within the city center are more than 12,000 PLN per square meter. The architecture of this town has changed significantly since 1989, and the people who remember its former image assert that it is no longer the “concrete, socialistic, grey Warsaw” it was in the past. Nonetheless, the new architecture’s aesthetics have been subject to fierce discussions. Despite the fact that Warsaw has had a rapidly growing real estate market, it has faced de-urbanization for the past few years as several inhabitants have been relocating to safer, more tranquil suburbs thus resulting in an increase in house price on its outskirts. Most of the property in these areas are detached houses which cost about 1,800 PLN per square meter. Investors are also shifting their projects to cities that have populations ranging from 100,000 to 400,000, for instance, Zielona Góra, Gorzów Wielkopolski, Białystok, and Bydgoszcz. The change in developer activities has led to an increase in the number of shopping centers, residential buildings, and commercial buildings built in such cities. Furthermore, the demand for properties has been rising in these cities (KPMG, 2015).
Other Areas and Markets
Other areas that foreign buyers usually like are the seaside and the mountains. Many people underestimated the Polish coast for many years thus resulting in lower prices of land. As a result, most foreigners started purchasing property in the coastal regions. The demand for leisure facilities in these areas has also increased thus prompting investors to initiate several projects here. That is particularly notable in Sopot which is the most expensive resort in Poland. It is located in Gdańsk Bay where the property price is about 10,200 PLN per square meter (Global Property Guide, 2016).
For many years, players in the real estate industry have overvalued second-hand properties until 2009 (after the 2008 economic crisis) when the prices of such properties began to fall. Various analysts predict that these prices will continue decreasing for the next few years. New apartments have become more affordable thus making the demand for resale flats drop drastically. The cheapest units in Poland were constructed before 1990 when the Polish government introduced programs to ensure that every family owns a flat. The government built several huge blocks of flats with minuscule rooms and small apartments (the longest block, situated in Gdańsk, is about 860m long and has 1792 units, enough to house 6,000 individuals). These kinds of property still constitute a bigger portion of second-hand real estate though they are no longer popular since many people consider them outdated and uncomfortable (Global Property Guide, 2016).
In recent times, loft apartment markets have gained more attention among many Pole families and business owners. The presence of many abandoned warehouses and factories (some of which have existed since the nineteenth century) has prompted real estate developers to refurbish them and turn them into residential units, state-of-the-art multi-functional facilities, shopping centers, offices, and hotels. The increasing demand for such apartments has made them relatively more expensive (KPMG, 2015).
Market analysts have revealed that the demand for office space has been rising over the years and a significant portion of this demand is from the financial, advisory, and production sectors due to increasing interest in the expansion of office space. The rising demand for office space and stable yields have attracted different kinds of real estate investors and resulted in the construction of many state-of-the-art commercial buildings within the cities. Furthermore, new tenants are ready to sign lease contracts for larger office space because they anticipate expansion of their establishments in the future. Owners of commercial buildings have increased rents for office spaces due to the struggle of businesses for larger office space, and this competition has compelled tenants to accept higher rents as well as smaller incentives. Modern offices have also become more popular because most developers currently use the latest architectural designs and technology to make them more attractive and offer tenants additional incentive. The increase in the demand for modern offices with sophisticated features and limited supply have led to a rise in the number of forward buying transactions for properties or offices to be completed in two to three years (PricewaterhouseCoopers, 2017).
Analysts put forward that renting is an inevitable choice for many Poles due to low growth prospects, the presence of extremely strict necessities for mortgage financing, and uncertainty in the labor market which discourage many households from being ready to incur long-term debts. Another factor that is driving more people to rent apartments and flats is the movement of individuals from various cities to the capital, particularly young people seeking employment opportunities. Studies indicate that nearly 21 percent of the households in the capital rent apartments and blocks, with half of this population residing in public and social housing. Research also shows that most residential buildings in Poland belong to private individuals (Global Property Guide, 2016).
Conclusion
Without a doubt, the Polish real estate market has enjoyed a growing popularity among many investors (both local and international) resulting in many investments in various parts of the country. That has made the value of transactions in the Polish real estate market rise over the years thus making Poland the leader in Southern and Central Europe. The demand for housing units and office spaces has risen over the years and is expected to continue rising, leading to more investments in the real estate. However, the prices for houses and office spaces have been rising by a relatively smaller percentage.
Bibliography
Global Property Guide, 2016. Why aren’t Polish house prices rising more?. [Online] Available at: https://www.globalpropertyguide.com/Europe/Poland/Price-History[Accessed 25 July 2016].
KPMG, 2015. The Luxury Real Estate Market in Poland, s.l.: KPMG.
Popescu, R., 2016. Real Estate in Poland. [Online] Available at: https://www.nytimes.com/2016/10/09/realestate/real-estate-in-poland.html?_r=0[Accessed 5 October 2016].
PricewaterhouseCoopers, 2017. The Polish Real Estate Market, s.l.: PricewaterhouseCoopers.
