Current state of the property market in Krakow

theblueenigma:

As for Irelands EU funded growth, the EU if anything hampered our economic growth and had little or nothing to do with it. Low taxation, education, location, american investment, language, credit, and the construction sector were the driving forces behind our 10 /15 yr growth spurt.

theblueenigma:

So does the rest of the world, some more than others, Poland is far from immune from it either and will experience more than most expect pretty soon. When all the Poles here and elsewhere return home due to the recession, expect Poland to have a massive unemployment problem. Once Obama penalises American multinationals for redirecting tax and labor abroad, expect mass scaling down of out sourcing in countries like Poland. As for Irelands EU funded growth, the EU if anything hampered our economic growth and had little or nothing to do with it. Low taxation, education, location, american investment, language, credit, and the construction sector were the driving forces behind our 10 /15 yr growth spurt.

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 6, 08, 04:06 / #
Deise, during the peak phase of booms rental yields tend to be particularly low as everyone is struggling to buy as quickly as possible and rents only as a last resort. When prices stabilise or retrace a little, rents have a chance to catch up.

theblueenigmaThreads: 7 Posts: 215 Joined: Aug 20, 08	Nov 9, 08, 06:59 / #
Ive drove past 'Macro' in Krakow almost everyday for the past five weeks. Everyday I have guys at the junction knocking on the window offering me flyers about a development of 8 resonably priced houses just outside Krakow. That seems desperate to me, and certainly not a sign of a healthy housing sector.

LwowskaKrakowThreads: 49 Posts: 504 Joined: Mar 9, 07 MEMBER	Nov 9, 08, 16:26 / #
theblueenigma: and certainly not a sign of a healthy housing sector. I agree.Besides it is a World Recession coming so Real Estate is hit first and I don't see how Poland would be different than the rest of the world. The worst is to come in a few months our economists predict.

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 10, 08, 04:18 / #
Is Polish unemployment increasing? No, it's still decreasing, and growth is both positive and strong. Just because Britain and America are about to enter a recession triggered by a banking liquidity crisis, it doesn't mean Poland is. Can you point to any weakness whatsoever in Poland's fundamentals? Furthermore, its economic growth is almost entirely domestically driven (for the time being). Luckily most Polish developments are NOT bought by British investors.

Grzegorz_Threads: 81 Posts: 6,213 Joined: Nov 16, 06	Nov 10, 08, 05:27 / #
ash1972: and growth is both positive and strong. It isn't.

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Edited by: ash1972 Nov 10, 08, 07:11 / #
What are the GDP figures you've got? BTW this is interesting: http://gospodarka.gazeta.pl/gospodarka/1,54642,5881063,EC_expects_3_8_ percent_GDP_growth_for_Poland_in_2009.html

boydie	Nov 10, 08, 14:45 / #
Yes I can point to some specific weaknesses in Poland's fundamentals, here are three off the top of my head - currency has dropped by 20% - main customer (Germany) is about to enter recession - budget deficit at a level where Euro entry will be difficult / impossible. This is just the start. Rental yields are poor and if you think affordability is not important then whatever business you are in, you are due a nasty shock. In any case, most of you boys seem to be trying to convince yourself that you have not made a mistake - those of us with longer experience in this part of the world are more sceptical.

Grzegorz_Threads: 81 Posts: 6,213 Joined: Nov 16, 06	Nov 10, 08, 15:45 / #
ash1972: BTW this is interesting: What's so interesting ? This is uber optimistic scenerio and anyway +3.8% is pathetic.

SeanusThreads: 22 Posts: 30,158 Joined: Dec 25, 07	Nov 10, 08, 15:53 / #
In today's global crisis, a 3.8% GDP growth wouldn't be that bad at all. Hardly pathetic Greg

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 10, 08, 16:56 / #
Boydie So what if the Zloty has fallen 20%? You're forgetting it has spent the last 4 years appreciating some 80%. This retracement will aid competitiveness. Germany may be entering recession but her spending commitments in Poland (through the EU) are signed and sealed. Rental yields? The fattest and juciest are, as ever, in Berlin. Try buying there and see how well your capital grows. If you think you can double your money now in the Polish property market, yes, you've made a mistake. If you think your Polish portfolio will outperform property anywhere else AND be relatively stable, you're pretty much correct. It's definitely a long term play now. Where do you think prices will be in 2012? Higher or lower than now? The only 'mistake' is to be in property at all AT THE MOMENT, that is, anywhere in the world. Getting out of a very strong market that temporarily has the jitters makes no sense.

Wroclaw Boy	Nov 11, 08, 03:27 / #
boydie: Rental yields are poor Property rentals in the larger cities are booming, 7-8% on residential property is easily achievable and 10% + on commercial is not unheard of and Im taking current property prices into considertaion.

ozdanThreads: 11 Posts: 70 Joined: Jan 18, 08	Nov 11, 08, 18:15 / #
Hi Ash1972, I think what boydie might be getting at with the zloty dropping in value is that it is a fair indication of market sentiment towards polands economy as far as the rest of the world is concerned. We are experiencing the same here in australia.. Comodity prices drop and chinas future growth is questioned (australia has a heavy dependance on china for its exports of natural resources).. and you see the value of our dollar drop as investors start to view us as a higher risk. In terms of Berlin vs Krakow with regards to real estate i think you are talking about apples and oranges. Germany has a completely different attitude towards housing. This said.. i do agree.. theres no point in getting out of a soft market if u are already in it.. unless you think things are going to be worse than forecast..

boydie	Nov 12, 08, 09:11 / #
Exactly Ozdan, challenged to name specific problems with Poland's fundamentals, I did so. Interestingly if Poland was considered a better bet than say Czech or Hungary then the zloty would have strengthened against the czk and huf. It has not. I can agree that lower German real estate prices are partly caused by less of a home owning culture (this is relatively recent and is understandable, when most families can remember their home being either bombed down or repossessed by commies). But other important factors are the requirement for a 33% deposit and the fact that there was already a good housing stock built in the 60s and 70s so much less of a supply problem. As mentioned before, one issue with high end developments is that they are unaffordable for most Poles and in fact 95% of the population would be what you call "mortgage desperadoes".

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Edited by: ash1972 Nov 12, 08, 09:25 / #
boydie: Exactly Ozdan, challenged to name specific problems with Poland's fundamentals, I did so. Interestingly if Poland was considered a better bet than say Czech or Hungary then the zloty would have strengthened against the czk and huf. It has not". Err.. what does an exchange rate - a market price - have to do with fundamentals? Fundamental statistics are calculated from data outside the market, such as umemployment, GDP growth or FDI. boydie: I can agree that lower German real estate prices are partly caused by less of a home owning culture (this is relatively recent and is understandable, when most families can remember their home being either bombed down or repossessed by commies). But other important factors are the requirement for a 33% deposit and the fact that there was already a good housing stock built in the 60s and 70s so much less of a supply problem. No argument there. I just don't think Germany is much of an investment in terms of real estate. boydie: As mentioned before, one issue with high end developments is that they are unaffordable for most Poles and in fact 95% of the population would be what you call "mortgage desperadoes". High end flats in central London are unaffordable for 99% of Brits, mortgage or not. True, they're falling in price now. Why? Because the investment banks that paid big bonuses for so long are now broke. My approach is, and always has been, to concentrate on the properties that the top couple of % would be interested in. Their wealth is more robust - but by no means unassailable. Yes, richer Poles losing their jobs would cause serious problems. My guess is that the poorer ones will lose theirs first thanks to decisions made by the richer ones :-)

Grzegorz_Threads: 81 Posts: 6,213 Joined: Nov 16, 06	Nov 10, 08, 19:33 / #
Seanus: In today's global crisis, a 3.8% GDP growth wouldn't be that bad at all. Hardly pathetic Greg But like I said, that's a very optimistic scenario (some expect even less than 2%) and Poland is not Germany or UK, here we need at least 5% to really move forward. ash1972: Germany may be entering recession but her spending commitments in Poland (through the EU) are signed and sealed. I agree that fluctuations on the currency market aren't that bad in this case but looks like you believe that "EU funds" make miracles, when netto these alms from EU have secend rate importance... Polish economy is generally based on export to Euro zone and when the growth over there is around 0% then you must forget about anything even close to strong growth here. And If things get really bad, their "commitments" will be worth nothing.

SeanusThreads: 22 Posts: 30,158 Joined: Dec 25, 07	Nov 10, 08, 19:34 / #
Then OK, u have qualified ur statement, fair enough

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 11, 08, 07:15 / #
That sounds a little high. I thought it was around 5%.

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 11, 08, 12:30 / #
At least the EU thinks things look OK for Poland: http://gospodarka.gazeta.pl/gospodarka/1,54641,5902201,An_island_of_re lative_calm.html

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 12, 08, 03:35 / #
Hi Ozdan, The point is that long term both China and Poland are going to be way ahead of where they are now. Investors are simply panicking at the moment. Poland is a strong market as real estate purchases are 90% domestically driven. What might stall plans along the way is the issue of unemployment - that will be the killer as that will physically prevent people from buying the properties they want to live in, investment choices aside. Yes the point about Berlin was that yields are great simply because Germany is a non home owning culture. Yield and capital growth markets are different kettles of fish.

theblueenigmaThreads: 7 Posts: 215 Joined: Aug 20, 08	Nov 12, 08, 05:11 / #
ash1972: Poland is a strong market as real estate purchases are 90% domestically driven As they were in Ireland and in most countries pre bubble burst . . . although admitedly I think Polands fall will be softer

SeanBMThreads: 41 Posts: 8,727 Joined: Mar 10, 08	Nov 12, 08, 05:50 / #
It will become more difficult for Polish people to get mortgages, it will no longer be possible to get 100 or 110% for people who can not afford it. I am happy about this because it just means people will not get too much of a mortgage. Poland has come a long way in the last 6 years (since I first arrived). Poland will be effected by the current world problems but not much. theblueenigma: As they were in Ireland and in most countries pre bubble burst Ireland's property market is a joke, you know yourself. People who could not afford it getting second mortgages etc etc, you probably know more than me. Poland is not going to go the same way as Ireland.

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 12, 08, 07:11 / #
What will be a factor is the quality of the property you have bought. Prices will be resilient for upper end developments as the target market was never the mortgage desperados but rather those who already had large deposits and good salaries. Let's not forget that Ireland now has a problem with recession and unemployment. Its EU funded growth spurt is ancient history.

theblueenigmaThreads: 7 Posts: 215 Joined: Aug 20, 08	Edited by: theblueenigma Nov 12, 08, 19:28 / #
SeanBM: Ireland's property market is a joke, you know yourself. A joke indeed, and everyone else knew the punchline a long time before most of the Irish did. The days of every Joe Normal owning investment properties are long gone, and good riddance to them . . sanity will slowly return to the housing sectors everywhere, house prices will reflect their true value and I wont have to listen to every muppet at a party discussing how their house in Marbella is worth :D ash1972: Let's not forget that Ireland now has a problem with recession and unemployment. Its EU funded growth spurt is ancient history. So does the rest of the world, some more than others, Poland is far from immune from it either and will experience more than most expect pretty soon. When all the Poles here and elsewhere return home due to the recession, expect Poland to have a massive unemployment problem. Once Obama penalises American multinationals for redirecting tax and labor abroad, expect mass scaling down of out sourcing in countries like Poland. As for Irelands EU funded growth, the EU if anything hampered our economic growth and had little or nothing to do with it. Low taxation, education, location, american investment, language, credit, and the construction sector were the driving forces behind our 10 /15 yr growth spurt.

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 13, 08, 04:06 / #
theblueenigma: As for Irelands EU funded growth, the EU if anything hampered our economic growth and had little or nothing to do with it. Low taxation, education, location, american investment, language, credit, and the construction sector were the driving forces behind our 10 /15 yr growth spurt. Tell me, would Ireland have achieved all of this had it been OUTSIDE the EU? Probably not. The point is, once inside, Ireland's super low corporation tax rate made it an obvious location for foreign companies' European HQs. Poland is following a similar (though not identical) route with big personal tax cuts from Jan 2009. theblueenigma: So does the rest of the world, some more than others, Poland is far from immune from it either and will experience more than most expect pretty soon. When all the Poles here and elsewhere return home due to the recession, expect Poland to have a massive unemployment problem. Once Obama penalises American multinationals for redirecting tax and labor abroad, expect mass scaling down of out sourcing in countries like Poland. As for Irelands EU funded growth, the EU if anything hampered our economic growth and had little or nothing to do with it. Low taxation, education, location, american investment, language, credit, and the construction sector were the driving forces behind our 10 /15 yr growth spurt. Polish economic growth is not dependent on winning outsourcing contracts from the US. In fact the only thing wrong with Poland's economy is what's wrong with the rest of the world. The extent to which Poland really is insulated from this will be tested over the next 2 years. The growth of Poland's major cities is driven by inward migration. Migrants returning home is a detail. And besides, they'll probably make sure they have a job in Poland first before giving up that waitressing/cleaning/nannying gig in London.. My previous question wasn't rhetorical: Do you think Polish property prices in 2012 will be higher or lower than they are now?

SeanBMThreads: 41 Posts: 8,727 Joined: Mar 10, 08	Nov 13, 08, 04:39 / #
boydie: high end developments is that they are unaffordable for most Poles and in fact 95% of the population Is there a country or has there ever been a country where high end developments were affordable to 95% of the population or even 50%? Were there high end developments during communism? I don't know. High end developments are for a small minority. theblueenigma: , house prices will reflect their true value and I wont have to listen to every muppet at a party discussing how their house in Marbella is worth :D I really and truly hope so. Some people thought they were millionaires, a good reality check was in order for a long time, it kept going up and up and up. Unfortunately it lasted this long. I have lived out of the country for years and have only heard things from my visits. But Poland is not like Ireland in many respects, it is not a crazy circus here. Actually I think for a good financial climate over here, a slowing down in the market is what Poland needs. ash1972: Polish economic growth is not dependent on winning outsourcing contracts from the US It would be a tremendous help. As for migrant workers, until they can earn the equivalent here as they can earn there, they won't be coming home (for the majority). Yes there will be more unemployment in Ireland and Britain. But there is a myth that the Irish or British will "look after their own" and sack the foreigners first. (from my own experience) It is economics not patriotism. Would you not agree?

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Nov 13, 08, 05:14 / #
SeanBM: But there is a myth that the Irish or British will "look after their own" and sack the foreigners first. (from my own experience) The exact opposite is true. British employers prefer East Europeans as they have more of a work ethic and deliver much better value for money. Employers don't pay them less; they just get better results for the same outlay. Three cheers for free labour. And sucks to socialism.

ArcticPaulThreads: 49 Posts: 245 Joined: Apr 7, 08	Nov 13, 08, 05:21 / #
SeanBM: But there is a myth that the Irish or British will "look after their own" and sack the foreigners first. (from my own experience) It is economics not patriotism. Would you not agree? I totally agree. The Poles and Baltic workers have earned a reputation for honesty and hard work that puts there UK workmates to shame. Especially the under 25's. It always disturbs me to see Polish University graduates doing non-skilled work. They deserve so much more.

LwowskaKrakowThreads: 49 Posts: 504 Joined: Mar 9, 07 MEMBER	Nov 13, 08, 13:39 / #
ash1972: Is Polish unemployment increasing? No, it's still decreasing, and growth is both positive and strong. Just because Britain and America are about to enter a recession triggered by a banking liquidity crisis, it doesn't mean Poland is. Sorry to contredict this optimism but according to this article from the Warsaw Business Journal , Unemployment IS increasing in Poland like everywhere nowadays. http://www.wbj.pl/article-43217-corporations-increasingly-announce-mas s-redundancies.html?type=

nspabloThreads: - Posts: 2 Joined: Nov 13, 08	Nov 13, 08, 15:08 / #
Yields on commercials are now like 6% average. Yields on residential properties I would say are like 2-3% (I dont know who is still buying to let ;-))

ash1972Threads: 3 Posts: 93 Joined: Oct 22, 08	Edited by: ash1972 Nov 13, 08, 15:43 / #
Lwowska, is this the first time Polish companies have made people redundant? I don't think so. The long term trend is clear: http://www.indexmundi.com/poland/unemployment_rate.html Obviously, Poland is going to have higher unemployment in 2009 than 2008. It's not never never land. nspablo: I dont know who is still buying to let ;-) People who can get low offers accepted by the developers, that's who. It all depends when you bought and at what price! I'm expecting around 4% on my 2 properties and I'm less than 50% leveraged.