Polish Property Bubble

Polish Property Bubble

Over the span of years 2002-2008 real estate prices in Poland have increased drastically. Between June 2006 and June 2007 alone the average price of a square metre in Warsaw rose from 6,683 PLN (1,636 EUR) to 9,540 PLN (2,519 EUR) (over 50% rise in euro terms).

According to a major Polish newspaper, Gazeta Wyborcza, the average monthly salary in Warsaw buys 0.26 m2, or in Kraków 0.22 m2.

Same sources give rental profitability at 4% yearly. This is lower than interest rates on bank deposits (5% in Polbank etc.).

In early 2007 the Polish property market began to show early signs of a property bubble; these included:

  • banks increasing loan periods from 30 to 50 years to extend credit limits;
  • over 1 million families already in debt, and roughly 300,000 more going in debt every year;
  • increasing interest rates - analysts predict 6% by the end of 2007 (from less than 4% in 2006);
  • number of new apartments for sale in Warsaw at one of the oldest Polish real estate portals: tabelaofert.pl increased from around 1,750 in November 2006 to over 4,300 in June 2007 to over 11,000 in July 2008;
  • exotic companies declaring real estate development plans;
  • Polish economy showing signs of the overheating: from 2005 to 2007 the forex deficit almost tripled (it had been decreasing in previous years); imports, which were decreasing (by 5%) in 2005, jumped to a 25% increase in 2007;
  • stagnation of prices and dramatic drop of sales in a long period of time with dynamically increasing supply of residential properties.

The arguments for further real estate prices rise or stabilization are:

  • fast increase of salaries - around 8% per year;
  • low figures of both housing estate area and apartments per person, compared to other developed countries worldwide;
  • money repatriated by Poles who have emigrated;
  • rapid urbanization - the population of rural areas and small towns is declining rapidly, while the population of major urban areas is increasing quickly;
  • Warsaw has a population of only 2 million people – approximately 5% of the whole of the country – very low for a capital city.

In 2010 Internet surveys showed that Poland is one of countries with rather high house price to income ratio (13.58 - it decreased from 23.90 in 2009) and estimated rental profitability at 3.92%-4.31%

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