Buying a property in Poland to rent out from the UK

People always complain, but in reality in 2004 average salary was 2290pln and now it's 3750pln:



But economists agree that majority of price increase around 2005 was caused by mortgage, salaries were rising too slowly to explain so rapid houses prices inflation. Foreign money went mostly into commercial estate and investments into private apartments from foreigners have been insignificant.

Moreover you're writing in present time, but price bubble was only between 2003 and finished in 2007. Since then nominal prices of apartments are falling. When counting in inflation, then they're now around value from the middle of 2005. Don't forget that inflation in Poland is usually bigger than in USA or Eurozone.

Surely the huge leap in prices between 2004 and 2006 was due to the wage growth you mention. All else has been, as you said, mortgages being unleashed. That wage growth, if true, got baked in to the prices in those 2 years. What happened since must be the mortgages, yes.

I'm not sure I agree with this talk of prices now being 2005 when inflation adjusted. But assuming you're right, it's not at all good if bread, milk and other essentials have also risen by a commensurate figure. As for wages, I know people in good jobs here in Wroc and they're not even taking home 4K (4 tys) a month now, so I don't give much truck for that idea about wages truly being averaged at 3750 in 2005 unless it was gross brutto and even then... If I look outside of my circle, of those actually working, most are on much less, like a bus driver on 160 a day. So, these averages are just politicians' spin or refer to IT people or something. I've just remembered I spoke to a secondary school teacher recently and was appalled when she told me her earnings, but I can't remember the figure. It was certainly not enough to pay the 7500PLN per square metre that one secondary flat seller here is asking and refuses to drop his price on. She can't even afford the more typical 5200PLN on some estates, even for a small one, and she's been working for 20 years!

Weather it's bad or not it's possible to establish only by comparing what risen more: groceries and other goods (total inflation) or salaries. Economists say that in last 10 years salaries were faster than inflation. Then it's good for people.

It's completely normal that you know many people who earn less than average, because as wikipedia says "The salary distribution is right-skewed, therefore more people earn less than the average gross salary." And it's great majority of people who earn less than average. It's like that in every country. So there is no reason not to believe average, just accept it :) And the value which I quoted are gross.


That's simply because Poland is not as reach country as USA and as a consequence many people will never afford their own house. There are rankings showing ratio between price of apartment and salary. You can see correlation between country richness and affordability of houses:

Warsaw moved up two positions

Even after the promotion of three places , Warsaw is still in the tail of the European countries , occupying only 22nd place ( previously 25 ) . Real estate prices in comparison to earnings are therefore the Vistula River just high. Such a state may be the fact that in Warsaw and throughout the country, housing is simply not enough to secure the basic needs of housing . As a result, the average net wage here allows for the purchase of only 2.5 square meters . Apartments of a high standard in the center of the city. According to estimates GPG , 120 - square meter apartment in the center costs approx. 399 thousand . euro (1.64 million zł ) . However, according to Eurostat, the average income raised by 20 % , an annual salary Warszawiak can be estimated at 8.5 thousand . euros or approx. 34.7 thousand . zł.

It's ratio of average salary net to the price of square meter in capital, that's why UK and France are so low, but there are places worse than Poland.

There are similar rankings comparing apartment price to average salary (availability) during time in Poland:

According to the analyst, " it was mainly the result of a significant increase in housing prices in Poland." Sadowski then relies on the NBP data on transaction prices in the primary market in the seven largest cities - in the fourth quarter . 2013. Prices were up by 7 per cent . higher than in the fourth quarter . , 2012 . NBP analysts also points to a reversal of the trend in housing market in Poland.

It shows similar results like the graph from my previous post about apartment prices inflation adjusted.

Which begs the question, how are these people affording to buy or rent? And is it sustainable or just musical chairs?

Luckily home ownership in Poland is quite high - 82.4%, so only remaining 17,6% have problem:

en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

Unluckily this 17,6% are usually young. They realize that rents in big cities, where are jobs, are too high and decide to emigrate to Western Europe, where average person can afford much more after paying their rent.

before even thinking of a residential property first look into the laws.If you get a tenant who knows the law it will be hard for you to take them out plus after paying agents and tax etc you will be lucky to get 3 or 4% on your investment.Try commercial but not offices where you can earn 7 to 10% if you lucky minus podatek ofcourse and if the business is good your tenant will not leave and also you can take them out legally quickly and go to komurnik for your moneys.if given a choice i would rather put 200k down and b% return uy a commercial lokal worth 500k with 4.5% or less you will make probably 3 to 5% return on your investment and dont forget the minimum of 3% atleast return coming invisibly long term in price rise of the property which you will see in 10 years or so and no headache for residential tenants.

Even if it is high, that's past generations. 'Only' 17.6% is, in any case, a curious statement. If you'd said 1.7% I'd have agreed to some extent. 17% is a different matter. In all likelihood, the 82% would not be able to own if they were subject to the prices v income now, and that's a very important thing to think about, Monitor. Prices are by any traditional measure far too high for 'average' Poles. And it's after all the Poles who deserve the same chance that should be considered first here, isn't it?

Btw the home ownership table you quoted is highest where intergenerational living is highest. That's not the same as really owning your own, individual dwelling.

It's not a statement 100% - 82.4% from that table equals 17,6%.


Why is it important to think about this alternative situation?


Traditionally in communism prices were I think around around 10 x higher than now. (if you don't count social communistic apartments which required to wait in queue for 20 years in order to get it)


Live is not a game with equal rules for everybody on earth that you could say that somebody deserve something.


Of course, when people cannot afford renting then they stay with parents, number of square meters per person goes down.

I agree with you that the situation in Poland is not easy. Taking mortgage for not so big apartment for 30 years can afford only marriages with good (close to average) earnings. Such salaries are available not for everybody and only in big cities. People in small towns usually don't earn enough to be able to put away over 200 000 PLN for a flat. That's why many people in small towns don't pay taxes, work illegally or work abroad in order to save for their home. So the situation is not hopeless. For many people there are possibilities.

It's not a good situation and people know it. That's why the topic of affordable apartments is repeating before every election. Currently there is some new program of subsidies to 1st apartment for young marriages too. Of course criticized, because it gives money to young people who can afford taking mortgage and pay own contribution - so it means above average rich young people. There is going to be some program of building some cheap renting houses. That's also partially the reason of previously mentioned housing bubble. Around 2004 government eased rules of getting mortgage. People became happy, that they can afford buying house, even that just with a credit. The bubble accelerated construction of houses, what influenced GDP growth.

So there is too little flats, that's why they're too expensive. New construction's speed is accelerating, but it seems too slow:



still much less is constructed than in communism.

'Only" was your word, not mine and not the table's.


I hope that's just a rhetorical question, I can't believe you'd ask it seriously.


So you do know why.


Well perhaps you should tell that to Shelter and most people who don't think an affordable roof is something one has to deserve, it's a basic need. Surely you, who's always linking and reading everything must have heard of Maslow. Here's a link, it's obviously one you've missed in your many linkathons.

simplypsychology.org/maslow.html

Merged: Foreigner who would like to buy a flat in Warsaw (as investment), advice needed

Hello,

I know that there are several risks such as:
1)I wont find any tenant.
2)costs will be higher than rental income and/or will minimize the potential profit to very low level.
3)tenant will be problematic.

Is there someone who already made such investment and came over the risks mentioned above? I would be grateful to discuss this person :-)

Aviv

Hello armada,

I must say that your post was the most interesting and practical)

you mentioned that ethics of professional involved in flat transaction (such as lawyer etc) is significantly different than in UK - you took a local polish lawyer for buying those 36 flats?

and ...how did you find 7 business partners that you can trust and manage with them so well?)) you signed agreements with them?

I would be grateful if you give me your contact details so we can discuss about this issue) if you dont mind of course)

Aviv

I'm looking for similar answers, will be following.

Hi Monitor,

Where do I find spaces to rent out for businesses? do you have some examples for websites?

thanks,

Aviv

Aviv try allegro.pl, otodom.pl,gumtree.pl.

You can invest in a found which invests in various business real estates. For example:
skarbiec.pl/srn

Here you have an article about investing in real estate:


inwestujtu.pl/inwestowanie-nieruchomosci

I find rents here very reasonable when compared to the value and potential mortgage size. Take a flat valued at 500,000. If you take out a 100% mortgage in Poland and pay around 5% interest. Interest only on it would be around 2000pln and 2000 is what you could only reasonable expect to when you rent out. Even if you pass on all the costs to the tenant you've still got to pay for upkeep and probably furnish it. And if you take an interest only mortgage, you'd not be reducing the mortgage size and only waiting for an increase in prices. Unless you really want property I don't see the profit.

When you say reasonable, I take it you mean too low to make a profit on considering the cost of purchasing the flat?
That is my observation too, and it suggests the obvious about property prices.

Yes I meant reasonable for a renter. I'm renting at the moment and can get a decent property for my budget. If I were to buy the property I'm renting, even if I put up a 20% deposit, I still would be buying around 5% more than my rent on a repayment mortgage taking into account extra costs the landlord is currently paying and not including maintenance. So I'd lose a considerable chunk of cash and then pay more monthly and I'd not even be reducing the capital. So it's a no brainer and I'm happy renting. In the UK the numbers are better for potential landlords. Maybe others can see a large increase in prices. I think we've already seen that. Maybe in an optimistic scenario the Polish economy keeps trundling along then property prices will rise. However, this will only be a few percentage points a year.

Actually, in some cases the numbers are only good for UK landlords if the British government keep supporting the market and house price inflation (a reckless thing to do, but that's another show).

In Polish cities, many ordinary workers can't afford even these (by comparison) reasonable rents because wages are much lower, as of course you know. It's mostly IT specialists and IT developers and similar workers from overseas that can 'easily' afford such rents. Also, many managers or senior managers are on very good money (I was told 12K a month at least). I have spoken to countless ordinary Polish workers here and they all tell me they have to share flats to make ends meet. Since then, rents have risen, but wages for many ordinary workers have not.

That's a good point about affordability and wage trends in Poland. Sharing has become common place in many European cities. I have professional friends in their late 30s in London sharing. Wages have been stagnant for many workers as well in Europe. Maybe a US system of fixed rents would help more people afford rents. I still think rentals are much more affordable in Poland than in the UK for all workers. Even in expensive Warsaw you can find a flat in Ochota, quite central and half decent, 60m2 for 2000pln. 2 people could share and that's 1000pln each. A common starting salary for grads is 2500- 3000pln and that means around 40% of salary. I'm not saying this is paradise but you really couldn't find that in London. You'd be way out of the centre in a dodgy area and probably sharing with at least 3 others.

Quite likely, yes! And some of them would be dodgy and violent or a thief -- all of this sort of stuff happened to people I know back home.

I think that London is a special case. Warsaw won't look so good in comparison to other big cities in UK.