THE rate at which Poles are leaving home suggests a grim picture of life in
the east. Everyone now has a tale about the Polish builders, plumbers,
nannies and cleaners seeking work here, but how often do you hear of people
going in the other direction? Plenty of British and Irish buyers are being
lured eastwards by the appeal of investment returns. Poland is the most
profitable country for buy-to-let investors, says Assetz, the investment
adviser, with a past capital growth rate of 33 per cent. As one of 250,000
Brits of Polish descent, I visited Poland recently to reconnect with my
roots and check out the property scene in the land of my grandparents.
An expanse of 312,685 sq km (120,728 sq m) with 40 million people, Poland has
a property market far larger than those of its neighbours. Mainly
agricultural but increasingly urban, the country has six major cities, with
foreign investment concentrated in the capital, Warsaw, and the cultural
centre, Krakow. Wroclaw, in the southwest, is also popular, with a skilled
work-force and German transport links.
House prices in Krakow grew the fastest of any European city last year – 54
per cent, according to Savills – and David Stubbs, senior economist with the
Royal Institution of Chartered Surveyors, predicts that prices will go on
rising over the next few years. “Interest rates remain low and inflation is
contained, as Poland is not involved in the euro,” he said. Krakow is
expected to maintain strong growth, partly because its glorious architecture
and wealth of history attract buyers, and partly because a large population
of students and middle-class families means a steady demand for studios and
spacious flats. Investors also benefit from a new breed of tenant, earning
good pay with international companies lured to the city’s business park by
tax-free EU incentives.
Warsaw has also benefited from this trend, and its skyline is changing to
prove it. The tower of the Stalinist Palace of Culture, lit up at night, now
jostles for position among a handful of slick skyscrapers. Zlota 44, a new
192-metre high-rise tower designed by the Polish-born architect Daniel
Libeskind, will soon join them, featuring 251 luxury apartments, complete
with crèche, spa and roof terrace. Three-bedroom flats start at €720,000
(£490,000). The developer Orco, responsible for Poland’s best hotel (as
rated by Forbes Magazine), Le Regina, is pitching the apartments at
wealthy residents of the capital who want a luxury upgrade near the central
business district.
The strongest demand is for mid-range rental flats that will replace the
communist legacy of cheap, poor-quality housing. Property prices in Warsaw
have risen by 33 per cent in one year, but with a national average
disposable income of just £4,150 per person, compared with £12,341 in the
UK, local authorities realise that price growth needs to be slower if more
people are to buy. The sharp increase in house prices has driven of the most
entrepreneurial Poles to fund a deposit by working abroad, where they may
settle if prospects at home do not improve. There are no fewer than 17
large-scale residential developments planned to start in Warsaw this year.
The largest project, Miasteczko Wilanow, in the old royal suburb of Wilanow,
is under way; the first phase will be completed in September, and the last
of the 8,000 flats will be ready in 2012.
The finished flats stand next to the concrete shell of a half-built block,
with protruding girders that streak the concrete with rust. This eyesore is
an ill-fated early experiment in public-private partnership. The Turkish
developer, working with the city of Warsaw, went bust, but the firm
overseeing the whole project, Prokom, says it has a new buyer for the plot.
Such problems, and the intricacies of a new planning regime, are delaying
development nationwide. Frequent ownership disputes are another barrier.
Delays push up the land prices, damp down the supply of new flats and
further crank up house prices. Housing supply is undeniably on the rise but
is far from meeting demand.
UK investors who want a holiday home must be willing to withstand bureaucracy:
those without Polish nationality must apply for consent from the Polish
Interior Ministry or be willing to set up and buy through a Polish company.
And it is much easier to buy a flat than a house with land attached.
According to Henry Wilkes, head of Savills’s Central and Eastern European
arm, buyers should expect to pay a 10 per cent deposit and the remainder on
completion.
The rapid emergence of the mortgage market is making buying easier: before
Poland joined the EU, most Poles and foreigners bought in cash or rented.
Now it’s easier for Poles with good job prospects to secure a mortgage
(increasingly in the national currency rather than Swiss francs, which
offered better interest rates), but foreign investors in most cases must be
satisfied with a buy-to-let repayment deal. An alternative is to refinance a
UK property and use the cash to purchase in Poland.
Despite a shrinking population (birth rates are low and emigration is
mounting), the housing demand is expected to increase as it is hoped that
Poles will begin to be in a position to buy their own home over the next two
decades. Steady migration from countryside to town will drive the demand for
quality urban housing.
The places tipped as the potential investment hotspots are Poznan and Lodz.
Poznan is the midway point between Berlin and Moscow and the second-largest
banking city in Poland, but its house price boom is just beginning. Lodz is
recovering from a textile manufacturing recession, but new businesses are
being attracted by cheap labour and its location at the crossing point of
two new motorways. But if your heart is still set on Krakow, the old Jewish
quarter may produce good returns. Krakow is immensely beautiful but it is
Warsaw’s evolving energy that seems most likely to reward buyers. The
capital feels exciting, and there is progress in the air.
For more information, contact Rednet Property Group: 00 48 22 318 7237
DATABASE
Some 85 per cent of Warsaw was destroyed in the Second World War.
Housing built between 1945 and 1990 consisted of low-quality prefabs.
In 2002 there was a housing deficit of 1.5 million properties. Since then
100,000 homes have been built each year, but there are still only 314 homes
for every 1,000 people.
The total value of international investment in Poland was €4.5 billion (£3
billion) in 2006. About half of this was in Warsaw’s central business
district.
Property prices: £50,000 buys a studio flat on the edge of Krakow; £150,000
buys a family house in a nice Warsaw suburb; £85,000 buys a two-bedroom flat
in Wroclaw; £65,000 buys a two-bedroom flat in Poznan.
Buyers pay 5 per cent of the sale price in tax plus a 2 per cent registration
fee. Capital gains tax is 10 per cent if you sell within five years and do
not reinvest in another Polish property.
