Poland Proving to be Dark Horse of European Property Investment

Poland Proving to be Dark Horse of European Property Investment


It has become apparent that Poland is a bit of a dark horse in terms of investment potential. At the opening of 2009 I remember reading reports that said Romania, Czech Republic, Bulgaria and Poland were looking likely to avoid recession in 2009. Since then all but one of those have fallen into terrible recessions, the odd one out is Poland.

According to Eurostat’s latest figures Poland’s Gross Domestic Product (GDP) was 2.7% larger in the 4th quarter of 2008 than the same period the year before. This became 1.5% bigger in Q1 2009 than Q1 2008, 1.3% bigger year on year in Q2 and 1% bigger year on year in Q3.

This economic growth in the face of global adversity sets Poland apart from the rest of Europe’s emerging markets, and has understandably led to increasing interest in the country from property investors, both private and institutional.

Most recently Poland has made it into the top 10 (position 8) of the 2010 Real Estate Global Opportunity Index produced by global management consultant A.T. Kearney. Previous to that Poland was the only emerging market in Europe to make it into the top 10 fastest growing construction sectors in the coming decade in a larger and more prestigious report titled: Global Construction 2020 and produced by Global Construction Perspectives and Oxford Economics.

The story of private property investment and buying in Poland is similar to that of so many in the region, many of which gained accession to the bloc at the same time in 2004: it became very popular in the run up to and following its EU accession, but as new markets started to emerge, like Bulgaria, Romania (joined 2007) and Albania, countries like Poland — by now quite expensive places to buy — lost their ability to compete.

I remember looking at properties in Poland at the beginning of 2007, when they were already falling in price because of drastically reduced demand — this was developments aimed at foreign buyers, not the domestic market.

Even the domestic market suffered badly during this international downturn, but nowhere near as badly as some. Because the economy has remained in good shape, and the banking system was largely sheltered from the international collapse, Poland’s residential property market has suffered only a slowdown rather than a crash.

The commercial sector suffered the same freeze seen all around the world, as almost every company, almost everywhere — those that weren’t being forced into cut-backs that is — put a freeze on all expansion plans; dug in and prepared to wait it out.

That has been changing since the middle of 2009, with several major commercial and retail projects being announced in the final two quarters, including multi-purpose shopping malls.

This has yet to translate into increasing demand and/or price growth in the residential sector, but this is set to change in 2010 and 2011.

During this time companies will continue to look back at their expansion plans with a view to helping the international rebound become a recovery. Taking new offices and hiring new staff will mean increasing demand for residential real estate to buy and to rent. There is also evidence to support at least a small international contingent taking up lots inside the new malls, which will mean incoming staff from foreign countries and further increased demand.

In fact the only drawback Poland now faces is the fact that prices have not fallen anywhere near as much as they have in the established markets like the US and the UK, and there isn’t the same level of distressed and repossessed sales. This will mean hardly any foreign demand for Polish investment property until mid 2011, at which point distressed stocks in the hotspots like Florida will be starting to wear thin.

Photo credits: Jaroslaw via Flickr