Author Leaonne Hall is an expert on the overseas property market and has written extensively for a number of newsstand titles. She previously produced three editions of the Red Guide to Buying Property in Eastern Europe, and has been writing in detail on the individual markets since 2003.
One of the biggest success stories in Eastern Europe, in next to no time Poland has turned itself around from being a communist, one-party, insular state into a democratic republic with a burgeoning western economy, complete with modern skyscrapers and a café culture.
Why buy in Poland?
Poland boasts one of the most dynamic and advanced of the Eastern European economies. Foreign investment exceeded $10 billion in 2006 alone and the country has successfully made the transition from a state-directed economy to a primarily privately owned market economy, which is now blossoming.
Ranked as one of the best investment opportunities in Europe, numerous budget airlines have bolstered the developing tourist industry, while the enthusiasm for investing in Poland has seen the property market perform beyond expectations. The burgeoning tourist market has contributed to the dramatic price rises, particularly in Kraków.
EU membership and the introduction of funds into the country have helped see it turn from being regarded as an eastern backwater to a leading European location, with the government actively pursuing adoption of the euro. The increased economic prosperity has helped to support and bolster the development of the property market.
Property prices continue to rise at a steady 10% per annum in the major cities, while a property shortage has created a healthy relationship between supply and demand. The local market is also performing well, with the level of home ownership rising steadily, increasing from 48% in 1998 to 55% in 2003. It has been estimated that €15 billion will be invested into Poland over the next five years, and combined with its strong economy and the anticipated adoption of the euro in the near future, Poland is the number one choice for many investors.
Politics and economy
Pursuing a policy of economic liberalisation since the 90s, the success of Poland’s transitional economy has been mind-boggling. While growth rates slowed from 6.9% in 2004 to 4.9% in the first quarter of 2005, in the first quarter of 2006, GDP growth rates jumped to 5.3%, making the Polish economy one of the most dynamic in the European Union. Enjoying GDP growth today of 5.8%, a 16.7% leap in investment and a flourishing exports market, Poland now has a thriving private sector which has created more than 300,000 new jobs in 2006 alone. Since 2004, EU membership and access to EU structural funds have boosted the economy, with an inflow of $100 billion in foreign investment since 1990.
GDP per capita roughly equals that of all three Baltic States combined, but Poland still faces some mammoth tasks, such as reducing its budget deficit rate and high rate of unemployment, as well as meeting the strict criteria for adoption of the euro, predicted for somewhere between 2009 and 2013.
Poland’s constitution dates back to 1997 when it formed a liberal democracy. Since the collapse of communism, politically the country has seen a series of weak governments, racked by instability and accusations of corruption. In September 2005 the right-wing Law and Justice party won the parliamentary elections, replacing the previous government – a union between the Democratic Left Alliance (SLD) and the Union of Labour. The current president is Lech Kaczyński, and his twin brother, Jarosław Kaczyński, is the Prime Minister. The new government has proceeded cautiously on economic matters, retaining the corporate income tax cuts while indicating their intention to reduce the top personal income tax rate.
Geography and climate
Situated in north central Europe, Poland is one of ten countries that joined the EU in 2004. Bordered by Belarus, the Czech Republic, Germany, Lithuania, Russia, Slovakia and the Ukraine, Poland is known for its shipbuilding and steel industries, but is far from an industrial country. Stunningly beautiful, the Tatras and Sudetes Mountains lie to the south, in contrast with the expansive agricultural plains of northern Poland. Inland, there are 9,300 glacial lakes, which are fed by the Vistula, Oder, Warta and Bug Rivers, many of them boast popular resorts. To the northeast you’ll find the stunning Baltic beaches while the many national forests are dense, primeval places, inhabited by bears, wolves and eagles.
Poland enjoys a temperate climate, with the best of the weather between May and September. June, July and August see temperatures of 24°C but they also experience regular thunderstorms. Winter is a different story, with cold, cloudy weather, and the country is buffeted by Siberian winds and snow in the south.
History and culture
Poland has repeatedly seen itself in the hands of invaders, with its borders constantly shifted, leading to the country being populated by many different cultures – Slavic, Celtic, Germanic and Baltic being the most prominent. Eradicated from the map and with its territories divided between Russia, Prussia and Austria during the 18th century, the end of WWI saw the restitution of the Polish state and the creation of the Second Polish Republic. The country suffered greatly during WWII with Poland losing the highest percentage of citizens – more than six million Poles perished, half of whom were Jews. The end of WWII saw Poland reduced to 20% of its former size, with the Soviet Union enforcing communist rule on the country. Independence came with the installing of a president in 1990.
Culturally, Poland has weathered the storm of war and occupation, with influences from both the west and east evident in the art, literature, folklore and architecture. Famous Poles include pianist Frederic Chopin, scientist Marie Curie, film director Roman Polański and painter Jan Matejko.
Polish towns reflect the whole spectrum of European styles, with Kraków boasting some of the best-preserved Gothic and Renaissance architecture in Europe. There are a number of UNESCO World Heritage sites in the country, including the Wieliczka salt mine, Auschwitz concentration camp, Warsaw’s historic centre, the old city of Zamosc, the Medieval town of Torun and the wooden churches of southern Poland, to name just a few. Teutonic castles and fine Polish mansions are to be found throughout the countryside, while the elegant cities of Warsaw, Kraków and Gdańsk are not to be missed.
Poland is predominantly Catholic, and the last Pope, John Paul II was born in Kraków. Roughly 98% of Poles are practising Catholics, but there are many other religious minorities, with 510,00 Eastern Orthodox, 120,000 Jehovah’s Witnesses and various Protestant faiths. The previously predominant Jewish population was decimated in WWII.
Tourism and getting there
Poland’s tourist industry has grown since EU accession in 2004 and is incredibly strong, being the eighth fastest growing in Europe. Outpacing more established markets such as Switzerland and Greece, most visitors are still from neighbouring countries – such as Belarus and Slovakia – with Americans and Western Europeans accounting for fewer than 1 million of the 15.2 million visitors in 2006. The 12th most frequently visited country in the world, today Poland is ranked 18th in terms of the tourism-related revenue it generates.
Thanks to the social and economic growth the country has experienced, and the westernisation of Poland’s travel and tourism market, there has been a 50% growth in the number of Western European tourists, helped by the increased ease of access. With 40% of all foreign investment in Poland in the tourist market, it is expected that the industry will continue to grow strongly, offering excellent opportunities for investors, as well as high rental yields.
Air transportation is expected to continue to expand, with many international routes to be added. Ryanair (www.ryanair.com) flies into Kraków, Rzeszow, Wrocław, Łodź, Warsaw, Poznań, Gdańsk, Bydgoszcz and Szczecin, while easyJet (www.easyjet.com) flies into Warsaw and Kraków .
The cost of living
Poland offers a very high standard of living, but for a fraction of the price of a Western European lifestyle, with prices roughly 40% less than the equivalent of the UK. A one-litre bottle of water will set you back 34p, a loaf of bread 29p, while a bottle of Poland’s legendary vodka costs just £7. You can enjoy a three-course meal with wine for a mere £11.
Prices have remained low, partly due to the high rates of unemployment, which have capped wage rises. Currently, the average Pole earns £471 a month.
Food and drink
Smoked meats, cheeses, sausages, fruit and vegetables are the most highly rated foodstuffs in Poland, although meals are more hearty than healthy, with meat, dumplings and potatoes featuring heavily. Kielbasa, or Polish sausage, is one of the most famous dishes, while stewed cabbage (bigos) and meat or potato stuffed dumplings (pierogi) and potato pancakes (placki ziemnaczane) are staple fare. There are numerous snack bars in the country, serving baguettes topped with melted cheese, fried mushrooms or grilled chicken, while hotdog stands serving fries and frankfurters are also common.
The most famous alcoholic product of Poland is its vodka. As the birthplace of the spirit, you will find some fantastic varieties on offer and it’s impossible to visit the country without sampling some. However, be prepared, the Poles are seasoned vodka drinkers and it’s not uncommon for three people to polish off half a bottle over lunch!
Poland has been touted as one of Eastern Europe’s most expansive markets, second only to Romania, and billed as one of the best locations for investors, with one of the healthiest buy-to-let markets in Europe – an investment of £100,000 is predicted to be worth £500,000 in less than a decade. Touted as offering price growth of 393% over the next 10 years – which may be rather unrealistic – PriceWaterhouseCoopers report that Poland is likely to see the largest increase in residential sales across Europe.
Poland’s property prices grew rapidly in the lead up to EU accession, with RICS reporting an average appreciation rate of 20% in 2002 and 2003 and 10% in 2004. Estate agents Knight Frank have forecast growth of 12.5% for 2007.
Poland is one of Eastern Europe’s most undervalued and fastest growing markets, with property in some areas increasing by 30% per annum and prices doubling in the last two years. Still in its infancy, and despite the massive levels of growth, continued demand, economic development and expansion of the tourist industry all mean the future is looking positive, with appreciation rates of between 10 – 30% predicted. Despite all this, prices remain much lower than in Western Europe, starting at £30,000 for a renovation project, £140,000 for a city centre apartment and £200,000 for a large, country house.
There are some negatives in the Polish market, with many properties being dark and pokey and some developments offering poor-quality finishes. You’ll also find many communist-era grey tower blocks, and these should be avoided – while they are cheap, there will be no demand from the local market, with affluence spreading and Poles seeking higher-quality housing.
While there were some slight concerns over the relationship between supply and demand a few years ago, if anything, Poland today is suffering from a lack of property. In the 1990s, Poland had one of the most severe property shortages in Eastern Europe, and currently there is still an annual shortage of 40,000 properties per year. Despite construction growing by 30% in 2005, with an average of 90,000 buildings per year being created, there is still an overall shortfall of 1.4 million homes, a situation exacerbated by the rise in home ownership among locals leaping from 22% to 55% in less than a decade. Consequently, market growth is seen as sustainable, with appreciation rates at their highest in the larger cities where there has been a significant growth in jobs and increased demand for longer term rents from Poland’s expanding middle class and young professionals.
Poland has also experienced a mortgage boom, making it easier for people to buy, although taking out a złoty mortgage can end up being incredibly costly, so look for a euro or alternative currency mortgage. Today, mortgages can be secured for 90 – 100%.
Forecast for 2007
- GDP: 4.8%
- Average property market growth: 15%
- Warsaw: 15 – 20%
- Kraków: 18%
- Łodź: 20%
- Tri-city: 15 – 20%
- Katowice: 15%
- Poznań: 15%
- Wrocław: 15%
Where to buy
There are a number of fabulous cities in Poland, many of which offer low prices and excellent appreciation rates.
Regarded as the hottest market in Poland, the UNESCO World Heritage centre of Kraków has seen price rises of as much as 58% in certain areas over the last couple of years, with this massive growth being largely attributed to the burgeoning tourism market – seven million tourists are visiting the city annually. A lucrative buy-to-let market, largely thanks to the demand from locals, as well as business people from overseas, a newly-built apartment can be picked up for as little as £80,000 – £90,000. It can be very hard to get planning permission in Kraków, but that said the most in-demand and popular properties are newly-built apartments. There’s a vast shortage in many areas and developments are selling out before construction has even begun.
While Kraków has been traditionally regarded as the epicentre of the Polish property market, Warsaw has in fact been outperforming the rest of the country. The economic powerhouse and capital of the country, GDP in Warsaw is four times that of the rest of Poland. Experiencing the biggest growth of all of Poland’s cities, the market is still maturing yet offers the kind of security London buyers can expect. With 17,000 new apartments built in Warsaw per annum, 2006 has seen prices more than double in some areas, averaging between 10 – 15% in recent years. There is a solid investment base here, with a strong demand from the local professional market who are looking for property to rent, and so these figures are expected to double by 2010. You can expect to generate yields of around 6% in Warsaw. For £75,000, you can purchase a two-bedroomed apartment, with prices ranging between £1,000 and £2,000 per square metre.
The dark horse in the market, there has been significant demand for rental property from the local market in Gdańsk, and during 2005 this was the strongest performing market in Poland, seeing the best appreciation rates. Situated on the Baltic coast and close to a string of beaches, Gdańsk has a historic Old Town that’s very popular. Benefiting from the ‘easyJet effect’, with budget flights opening up the market in 2005, there is a significant shortage of accommodation for short-term holiday lets, meaning you can secure good rental yields. Prior to EU membership, prices rose sharply here, although the market has stabilised following a period of supply outstripping demand, yet it still experienced rises of 28% in 2005.
Experiencing faster growth than any Polish city, this is a rapidly developing commercial centre and university town. Cheaper than areas such as Warsaw and Kraków, property costs an average of £650 per square metre compared with £1,000 in Warsaw. Now located on the budget flights route, residential properties are anticipated to grow by between 15 – 20% in 2007. While playing second fiddle to cities such as Warsaw in terms of publicity, Poznań still represents an excellent investment while remaining fairly unknown. This fast-growing town has high employment levels, a young, well-educated and affluent population and a shortage of newly-built, high-quality developments. With demand consistently rising, the future looks good for investment in Poznań, especially as the market remains significantly undervalued when compared to much of Poland.
The fourth-largest city in Poland and a bustling financial centre which is second only to Warsaw, Wrocław is well located, being central to the cities of Prague, Warsaw and Berlin. Served by a busy international airport, Wrocław is easy to get to, and once you’re there, you’ll also find that this is an excellent place to live. With over a million tourists visiting the city every year, Wrocław is Poland’s third most popular destination. Demand for property is high, with the population currently sitting at around 640,000, but destined to grow to over a million within a decade.
A popular destination with both Poles and international visitors, back in the 1920s and 30s this was a haunt of the international jetset. Still popular with tourists today, the seaside and spa resort of Sopot is part of the Tri-City area and has been voted one of Poland’s best places to live. An interesting investment opportunity, Sopot is Poland’s summer capital and is easy to reach, being located close to Gdańsk International Airport. Prices rose by a record 6.7% at the start of 2007, with the average price of property per square metre increasing to 6,396PLN (£1,125).
Zakopane and the ski resorts
Poland’s ski facilities are well developed and the two main resorts in the country are Zakopane and Szcyrk, which have already played host to World Cup skiing events. Offering great value for money, guaranteed snow and year-round facilities, tourist figures sit at over two million in Zakopane alone, with a ski chalet generating a rental income of around £450 per week. Demand is stimulated by regular budget flights into Kraków, only 100 kilometres from the resorts, and it’s a journey that can be made in an hour and a half, thanks to the construction of new motorways.
Szklarska Poreba, a spa-ski resort, is touted as being the next big hotspot. There’s plenty of property to chose from, cheaper prices than the more established resorts and an increasing number of tourists, all of which is having a positive effect on property market growth.
What to buy
With huge levels of construction taking place in Poland – although not enough to keep up with supply, a problem further exacerbated by a shortage of builders – newly-built properties are the most popular and in-demand style, being easy to rent and sell on. Agents advise that you either buy off plan or you buy an old, characterful property to restore. This is due to the extremely poor levels of construction that occurred during the 60s and 70s – the stereotypical communist tower blocks of which more than 60% require repair. Newly-built apartments or houses in the city suburbs offer the best investment, thanks to demand for rentals generated by the growing Polish middle class and professionals; these can generate yields of between 6 – 8%. Older properties can also be a good investment, especially if they are located close to the ski resorts of southeastern Poland. A country house with a living area of 270 square metres can be picked up for just £219,000, with apartments priced from £30,000 and chalets from £80,000.