Polish real estate market
Polish real estate market is going to crash. Why do I think real estate in the Poland and Eastern Europe will go down? Yes the Polish market will really go down! I have seen it in the US many times. People would say oh it will go down only 10%, like they said in the USA and 50% latter they are wondering what happened. In fact, my landlord in Boston, who was a plumber, is worth 30 million dollars now because he has spend his life buying on low cycles and selling on bubbles. He owns over 100 buildings in Boston all because people did not believed property could fall, so much and then developers were forced to sell when they collapsed to pay off debt. Let me explain why I think this will happen in Poland, a Real estate market collapse. I live in Krakow, Poland. Real estate costs 7000 pln a square meter for a flat in Krakow. The average in the EU is 3000 pln a square meter. Poland does not have the money of other counties.
How to value Polish real estate or any other real estate
Basically the rule of thumb is this. Take the average netto income in any country you live and this is what the cost of a flat should be per square meter. If in Krakow the average is 2000 pln a month. A flat should cost 2000 pln a square meter. Poland has the biggest difference between average wages and prices of flats in the EU. The average person in in the Polish market can only afford a flat with little money down. Speculators are pulling out of the Polish real estate market for greener pastures, i.e. rising price real estate markets, for example Bulgaria and other new land rushes. Now Poland is a hot economy and will stay strong for many reasons, however, the real estate market is a a bubble of ridiculous proportions.
Polish real estate market | how much would you?
In the Polish real estate market, I would not pay more than 2000 pln a square meter. Really. I could build a house in the countryside for that or have a beach front property in Florida for the same price, why would I pay 3.5 times the price for a flat in Krakow?
Bank role in Polish real estate market
Polish banks 1 year ago gave out 110% credit, no money down. Now they require 30% down. Their rejection rate 1 year about was 2 in 10 people, now they reject 8 in 10 people for a loan. I live in a flat in Krakow, Poland that I rent that is 70 meters and valued at 600000 pln. That means I would need 200000pln cash for the down payment.
Polish real estate market liquidity
Are you telling me the average Pole who makes 1800 pln a month has 200000 pln just laying around in cash. What about day to day expense to pay with this 1800 pln a month. This is why I think Real Estate in Poland is going down. I think maybe over 50% of the current value. I will invest in the Polish real estate market, in 1.5 years.
Polish real estate market over supply
With the help of EU money Poland has received lots of help to build new flats. Now those flats are being finished and will be on the market in 2009. This means in the polish real estate market supply is increasing, but where is the population growth? Poland has a flat or a negative population growth. Based on supply and demand the Polish real estate market is going down.
Polish real estate market and Polish standards
Poland is a Western EU country. Everyday it is getting stronger. I am an American living in Krakow and can see that this country is amazing and the economy will continue to get strong. Here is the thing, many of the flats build on the Polish real estate market are 40 meters. or 50 meters. They were built by very greedy developers trying to maximizes their profit, and not caring about standard. They knew the profit point was with many small flats. Yes many new constructions are sold as luxury but they still are 45 meters. Poles are very western and now the new generation are having families, and they so not want 7 people in a 45 meter flat anymore. This is another reason why demand in the over supplied Polish real estate market will be weak. Poles I think now want more room in a house or larger flat if they want a family and will wait a little until they can pay for something bigger than 40 meters.
I am not crying for developers on the Polish real estate market
I do not know about you. But I can not get excited about 40 meters anymore with a family. Further, I am not crying at the highly leveraged Polish and British developers who now are holding empty buildings on the Polish real estate market.