Living in Poland I have seen a lot of changes. The one thing that strikes me the most is the real estate market in Poland. I am not in the business of real estate, rather I have a Master’s degree in Economics and passively observe market changes. After about four years of watching the pull back from its bubble I think it is still not ready to do anything but continue its downward path. I am very pro Poland, but being realistic about the economic situation in the land and housing market.
Why Polish real estate is not ready to recover
It is all about supply and demand. This is what determines prices and nothing else. Cost and value are notions that are through back from Marx’s economic theory that the price of an object was determined by the labor or cost to make it. Modern economic theory says value is subjective and determined only by supply and demand. This applies to housing prices also.
- EU is not only in crisis but the Euro might fall apart, and leave the EU in shell shock for a few years, maybe ten. Countries that were throwing money into the Polish land rush are now fighting to save their own houses and collapse. Ireland, Scotland and England were the main speculators and now their lands are in trouble.
- Supply of housing has increase in Poland based on speculation that there is a huge over capacity of residential and commercial units. Because of the economics of the business cycle plans that were started years back are being completed now and the result is a huge over capacity. Empty lots and luxury appartements can not even be rent. Why would they be?
- Demand is continuing a down. I see large buildings that are brand new, falling apart a little as they have been empty for years. My friends are building new houses themselves in the suburbs rather than living in over priced city flats. Credit has not and will not ease any further. The population is not growing. Unemployment is about 13% which is not the best for a high prices.
When I get the cash I will most likely build a house in the countryside, cheap. A house designed to my specifications and liking not some builders conceptions (to maximize profits) of a boxy house with small windows and a over sized red rood. I will build my dream home, eco friendly and in American style home. I want Polish people to do the same, that is have their dream home in their idea not someone builders idea and they pay it off with a mortgage for 30 years of hard work. Its very unfair to the people that live here.
Is this all bad? Not at all I am a patriot. I love Poland. However, prices are adjusting to normal levels from inflated highs based on foreign speculation. A unit in a city should be about 2000 Polish złoty a meter, but it is still about 5,500 pln a meter. The average person can not afford real housing because the Polish real estate agents and developers are trying to keep the prices inflated at all costs.
My brother in law build a home in the Polish countryside for under 1000 pln a meter. Its beautiful and not far from Krakow, where he works. Granted he did a few things himself but mostly local guys did it for him. A full house done by a builder now is about 2000 pln a meter.
How long will the prices of land and buildings in Poland stay inflated
Price will stay excessively high until they come down to 1/3 the level they are at now. So if a unit costs 6,000 a meter it will have to come to 2,000 a meter. I have seen the same situation in the USA. Prices in Florida and California are cheaper than Poland. These are luxury condos on the beach. I have seen bear markets last 10 or 15 years or never recover. People are fooling themselves if they think they can just wait it out. Take a look around you in Europe what is happening. It might take years if ever.
The good news is only the builders and Polish real estate agents lose. The Polish people will get reasonably price real estate again.