Polish real estate market

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.

24 Replies to “Polish real estate market”

  1. oh for the days in krakow when you could buy for 2000zl stupid me did,nt buy now regreting it,could have had a house podgorze for 3000zl a metre new build to pity about the church bell nearby.i could have bought when i had 300,000zl fat chance now

    1. Tell me about it, I live in Podgorze in Krakow and I can not own a house in Krakow or even a flat as the price is higher than back home in the USA. The Polish real estate market is still too high. When real estate falls to 2500 a meter it will be ok but still not great. And that is 2500 Polish Złoty not dollars or Euro. The price of a meter should be the average monthly wage. In the Polish real estate market that means about 2500.

    2. I am real estate investor. The price of a square meter depends on demand and supply not on the average income in the country. Rome 7000 E/sm, salary average income 1500. Belgrade 2000 E/sm, income 300 euro month. In Europe the buildings are made to last till 1000 years, in Usa no more than 50 years.
      No possible to compare

      1. Who lives for 1000 years? Also I see homes in Europe, stone homes have trouble. I see American homes made of wood three hundred years old. There are homes in Florida made exactly like a European home, with stone and red roof. You are just talking.
        What good is a home if you can not afford it.
        Homes are overpriced in Poland and will be so for the next twenty years. About 2030 they will start to come back to realistic level for the income of the people.

  2. the Poles are dreamers .
    How a flat can cost over in dirty and cold Krakow, than in Cannes south of France ?.
    They think money will grows on trees with capitalist.

    1. Do you know why? Because green beautiful Krakow with over 100 churches and more cafes per square meter than anywhere in Europe and the oldest University in Europe (-Czech) and was the center of civilization when western Europe was stone knives and bear skins etc. Krakow is a beautiful Gothic city- Krakow a better place to live than France full of snobs, with riots and crime. However, the Polish real estate market is over priced. Very over priced. But you make a very rude comment, which I deleted that is why I replied so hard to you. What is so great about France? Nothing. Really. It is all hype. Ok you have crime and tourist and riots. I am an American and could live in France but why? Krakow is much nicer. France is all commercial and for tourists. France is richer only because they were imperialists for centuries and when the Germans came they laid down their arms and became Vichy which the Poles never gave up and then had the Russians impose communism. I deleted your other comment but watch out before you attack another group of people.

  3. when in march it is 0 degree celsius in krakow with no sun , in cannes it is 20 degree with big sun and bleue sea.
    there are festival of cinema .
    why rich people go for holliday in the french riviera ? and not krakow ?.
    there is nothing special in krakow , just young foreigner came before just because the girls was easy. that’s all.

    venisia , florence , roma , paris , prague , budapest , are 10 time more beautifful than krakow

    and krakow is only 750 years old ,there are many other city much older in europe.

    sorry but jagiellonsky is not the oldest university in europe
    the older is bolognia from italia and after it is paris

    krakow is not the most beautiful city in europe , poor infrastructur , too cold , dirty city .

    this is the reality .
    it is my opinion , if you want think krakow is the top the the world , as you want

    1. Zupelnie sie zgadzam z toba Alex. Krakow jest dosc ponura dziura, ( ale ma kilka ladnych kosciolow. )

      OK I’ll revert to the English language. I don’t know whether our Polish American friend can actually speak the language of his ancestors. Being American, I very much doubt it.

      Poland doesn’t even begin to compare with the beauty and history of France.

      I am British but of Polish descent. Polish property is way overpriced for what it is and the bubble will definitely pop. Only the unwise would buy there.

      1. France and England were imperial powers who enslaved people arround the world. See history the way it is. Napoleon was a dictator who killed millions. England was a ruthless empire. See the reality of history. So if you are saying Poland does not have the beauty of the history of these countries than you are right. But if you talk about how Poland was the first democracy in Europe and how they are a spiritually advanced country while the west has slipped into the malaise of decadence, than you are wrong.

        I think to compare one culture in the world to another is fruitless and arrogance as it is all culturally relative.

        Polish real estate is over prices based on wages to asset value many times what the west is. But to say it is did not have a rich history compared to another country is nonsense and arrogant.

  4. and i am sure you live in krakow because you are with polish girl.
    polish girls are the only attraction of Poland.
    nothing else.

  5. i lived 5 years in krakow , for ………a girl of course not for the weather ahahah

  6. hi lads,

    I’ve been working 2 years in Krakow, Poland and I lived in first person the sky rocketing prices of that city. I’ll not make comments about Polish and foreigner speculators trying to squeeze the estate market, I’d simply say that unless there’s a regulation to contrast the speculation, living in Krakow is gonna be a pain for load of people. At the moment, paying a rent is much more cheaper than buying. you cannot cover even the mortgage with the rent, unless you do not take a 20years mortgage. therefore why to buy, if you do not have cash to pay? and even rents are flying high, cuz people want to “invest” and need tenants to pay their mortgage. it’s a spiral i wish could explode.
    And well, Krakow is a nice city, people may live there for different reasons. Having a wife is for sure not a wrong one as everybody would like to live with his own partner.
    L.

    1. Titus, you hit the nail on the head, In this comment, I am writing more about Krakow but it applies to Poland in general.

      Polish real estate developers, housing and property rental and sales agencies and foreign speculators have pushed the market into a bubble. But the good news is every corner of Cracow has new apartments being finished this year and next. In fact so many they prices that they are offering are ridiculous, many times higher than beach front property in Miami for example.

      In Poland, blocks of flats are not selling they have to pay the mortgage or land development credit to the banks and prices are coming down. I have heard that real estate is now being auctioned by the banks in Krakow. In fact, in good places like Kazimierz, they are selling for under 4,000 pln a meter, down from 12,000 a meter and still falling, perhaps to 2,000 a meter. This is supply and demand. However, if you walk into any real estate agency in Krakow they tell you prices are going up.

      I know real estate agents in Poland personally and they say prices are falling no one is buying. Supply and demand rules over fake hype and greed. So if you do not like the real estate market in Cracow wait and you will see prices go to normal levels, about 2000 pln per meter or better.

  7. Interesting take but… Its 0.2010 and nothing much has changed (perhaps 5-10% max in certain areas). I am interested in what is your take on that now – since in 2008 you wrote that you would be buying 1.5 years from that time (which is now). Do you think your predictions were wrong? Thanks ! Oscar

    1. Sometimes real estate down cycles last 10 or 15 years. The stock market is much less ridged than the real estate market and from 1999 to 2010 there was a loss not a gain in from 1967 to 1982 there was a loss in the US equity market.

      People’s memories are short and they think it always goes up. Wrong. Markets will go up when there is a reason to go up. This is always connected to supply and demand. Right now I see many flats coming on the market and the population of Krakow decreasing as more people are moving to the suburbs. This means downward pressure on the market will continue until something radical happens. With 13 % unemployment I do not see the market moving.
      I live in Krakow and I see nothing moving. Empty buildings. I certainly will not buy these over priced flats.

  8. I am Renato from Italia , i sold my flat in Krakow last year , i sold it 25% cheaper from what I paid 4 years before . and it took 1,5 year for find somebody for purchase it. It was very hard to sell it , but good , I am out this no resell market. no buyer , and the few have lot of problem for have a loan….
    foreigners are not interesting to buy in Krakow now , and it is too far much expensive for polish people .
    the Polish owners needs times for understand they will not have the fortune they expect to have for their flat.
    some flat are more than 2 years on the resell market , and owner dropped just a little the price , if they don’t make a huge drop , thy will never sell.

    some real estate agency in Kraków closed , because no deal….

    Polish owner still live in dream , but soon they will wake up , and understand they cannot be rich just in selling one flat ….

    1. It is not the owners as much as the real estate agencies. The owners wanted a 100% profit in a few years, but now their expectations have adjusted downward. It is the developers, many who are not Polish, who are working with Krakow real estate agents and Warsaw real estate people that really try to keep the price in an artificial bubble. I have seen this in the USA a number of times. The market eventually collapses. I would not touch new developments at this point as these are the ones that are the most inflated. New flats coming on the Polish market are the one people try to get the most profit.
      Owners just want what they paid.
      But either way I do not care. As a potential real estate buyer, I do not care what the other guy paid for his house. Just like if I were in the stock market do you care if the guy you buy the stock from made a profit? Its all about supply and demand. Thanks for the comment.
      I think the market will continue to fall back to the levels were the average Polish person can buy. If Poles make 2500 pln a month this should be the price per meter. Even that is a lot of money. I have seen markets in the USA go to 800 pln per meter and less.

  9. Interesting post, the exact same thing happened in Ireland….developers, bankers & investors skewed the market for years. Now property in ireland has halved from 2007 and has more to go… I’ll be in Krakow soon working but I wouldn’t touch property with a barge pole…looking at what the local average salary is to what investors are looking for flats is ridiculous….banks are giving out 45 year mortgages I hear…toxic stuff

    1. Mike you are a wise guy and know real estate. The credit market is a mess. I know I was in the investment business for years. The real estate market in Krakow and all of Poland will take maybe ten years or more to recover at this point. I thought sooner but I would not touch any invest property in Poland until the far future. People got greedy and there is not reason for you to pay for their mistakes with your hard earned money. I will build outside the city where the cost is a fraction. Polish roads and rail are being upgraded with EU money and there is an mass exodus to the suburbs like what happened in the USA.
      For example, Hartford, CT when from the richest to the second poorest city in the USA in terms of poverty level once I-84 and I-91 went in to carry people to and from the city from the suburbs.

  10. There are clearly 2 types of flats in Warsaw – the old and the new.

    Generally I would not want to live in the old, and I am sure there are many that want to leave ‘the old’. It’s difficult to generalize on prices in Poland.

    I’ll admit that the prices are high – but worse case scenerio, the value of the property falls, it means you will be able to buy a similar flat for the same reduced value.

    Trying to time the market is tough – back home prices stayed flat for 20 years and then close to tripled in the next 10 years.

    The market is cyclical, and always will be.

    If you want to maximize your return, buy back in 2003. Since you can’t do that, just rent if it makes you happy. It is cheaper than buying (on higher end properties at least).

    In terms of buying for speculative purposes, Poland seems like a dangerous place to do this currently.

    1. Poland is dangerous in terms of real estate. I am an American and lived here a good part of my life. I am also an investor and I do not care what people do with their money, but there is no way, I would touch this market. There was a book that studies returns on investments called ‘Irrational Exuberance’ it talks about how expectation of returns get out of line with reality in markets like real estate. This is the Polish market. It is has such an over supply that nothing seems to be able to stimulate it.
      On the insider real estate people have admitted to me, they would not touch Polish property except if you want to lose money, even though they are trying to still sell.

  11. Polish real estate market is a huge bubble! And as every bubble it will definitely burst, around 30-50%. History likes to repeat. Take a look at bubbles in Japan, US, UK, Ireland. Poland always reacts with delay comparing to the economic situation in the world.

    1. Poland is way over valued. I think 50% is conservative. I live in Florida now and can buy a new home on the beach with high standard, like 150 meters for the price of 20 meters in Krakow, actually cheaper. So it is crazy to buy anything in Poland.

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