An optimistic mood prevails in the Polish market, and there are several reasons for it, including economic growth, increases in investments causing price increases, relatively high yield rates and real estate market stability. This Tranio.com report highlights the various features
A robust economy: stable growth expected through 2020
Poland is one of the few European countries that passed through the 2008 financial crisis unscathed, undergoing no recession. Its economy is the eighth largest (in PPP terms) in the EU. Its GDP has been increasing since 2013; according to some forecasts, the average annual growth through 2020 will total no less than 3.2%. Moreover,
Another important indicator – unemployment – has lately shown a tendency to decrease in Poland; however, unemployment is expected to stabilise at about 6.3% through 2020. For investors, first, this means relatively low risks for leasing property. Second, the Polish labour market is attractive to businesses due to its significant quantity of highly qualified personnel with higher education degrees and knowledge of foreign languages, along with low salaries compared to Western European countries.
Another positive trend is the reduction of the reference rate, which in March 2015 was lowered to 1.5%, the lowest
Growth in investments: volume may reach
a 10-year maximum in 2017
Investors who have detected positive trends in the Polish economy have already begun actively investing
There are two main reasons for this performance. Firstly, investors who have not closed deals but are already negotiating purchases show extra activity. Secondly, investors consider developing markets such
Earnings potential: yield rates higher than in other EU countries
Prices for real estate in Poland are trending upward, whereas rental rates
However, despite the decreasing returns, the ratio of rental income to real estate cost in Poland is higher than in other countries. For instance,
A stable market: no slumping house prices in the past 10 years
As is already well known, real estate can generate income not only from rent, but also from resale. Poland offers good opportunities for income due to capital gains: its residential real estate market stands out with its relative stability, and it did not experience price slumps as Greece and Spain did. Periods of decline in the Polish market lasted
Housing prices tended to grow from 2004, the year
Increases in housing prices in Poland are affected by low mortgage rates, as well as incentive programmes for borrowers aged up to 35 years (Mieszkanie dla Młodych, MdM) buying their first houses. The programme offers subsidies totaling 10% for singles and couples and 15% for families with children.
The average cost of a square metre in Poland (€934.5) is significantly lower than in other European countries. For comparison, housing in Spain costs on average 1,600 €/m², and in Germany 2,400 €/m². Prices significantly vary from city to city, though. For instance, the highest cost per square metre can be found in Warsaw (€800 on average) and Krakow (€1,600), and the lowest in Zielona Góra (less than €800 on average).
Consequently, housing in Poland attracts investors with its low price and opportunity to profit due to price appreciation.
How to choose Polish investment objects
Warsaw is the biggest business and finance hub of not only Poland, but also the whole of Central and Eastern Europe. There are offices of major multinationals, developers and investment funds located in this city. Other cities in Poland also draw attention from foreign investors. The seven largest real estate markets of the country consist of Warsaw, Krakow, Breslau, Trójmiasto (Gdansk, Gdynia and Sopot), Katowice, Poznan and Lodz.
The largest office markets in Poland are Warsaw and Krakow. These cities are in demand regarding the residential segment. Retail properties in Krakow, Poznan and Trójmiasto bring in most of the capital. Investments in industrial properties are concentrated in Breslaw and Trójmiasto.
Retail real estate accounted for 43% (€1.9 bln) of commercial investments in 2016, and it is attractive due to rental rate increases and active construction. Investments in offices amounted to 40% (€1.8 bln). This sector stands out because of unparalleled demand for leases and record development scale. Industrial objects, which brought in 17% (€774 mln) of commercial investments, are also popular with investors due to high demand for leases.
Advantages and disadvantages of investment into different real estate segments in Poland Source: Cushman & Wakefield, Knight Frank, Colliers
A forecast: what to look out for in 2017
Both the forecasted GDP and consumer demand growth match the increasing activity in the commercial real estate market in short and
Investors consider Poland a steady market. Commercial real estate supply in Warsaw and provincial towns is still under development, which is why there is still more potential for market growth.
We expect the main trends in 2017 will comprise the following:
- Continued decrease in profitability. Rental rates may well decrease, which is a reason for a possible decrease in profitability
- Increase in the rental rate gap between
premium-classand lower quality-classobjects
of investors’interest towards provincial towns (e.g. Gdansk, Lodz and Poznan)