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Last Updated: Jan 08, 2014




Poland’s property market is now gradually improving, as the economy slowly recovers. House prices continue to fall, albeit at a decelerating pace. Demand is also rising. However, residential construction activity remains down.

During the year to end-November 2013, the average price of apartment in Warsaw, the capital, dropped by 2.86%, to PLN7,781 (€1,853) per square meter (sq. m.), the lowest annual decline this year, based on figures from Ober Haus. When adjusted for inflation, property prices in Warsaw fell by 3.57% over the same period.

House prices in other Polish cities continued to fall, albeit at a slower pace. During the year to November 2013, Gdańsk saw the biggest house price fall of 5.9%, to an average price of PLN5,472 (€1,303) per sq. m. Both Poznań and Łódź recorded a house price fall of 3.2% over the same period, to PLN5,283 (€1,258) per sq. m. and PLN3,738 (€890) per sq. m., respectively. In Cracow, house prices also fell by 2.6%, to PLN6,522 (€1,553) per sq. m.

House prices in Poland have been falling since mid-2008. Compared to pre-crisis peaks:
  • In Warsaw, house prices are down by 15.5%
  • In Cracow, house prices are down by 20%
  • In Poznań, house prices have fallen by 30.2%
  • In Gdańsk, house prices plunged by 29.9%
  • In Łódź, property prices plummeted by 37%

Residential construction remains weak. The total number of dwellings for which permits were granted fell by 7.5% y-o-y to 37,000 units in Q3 2013, according to Central Statistical Office (CSO). Likewise, the number of dwellings completed fell by 7.6% to 34,200 units in Q3 2013 from a year earlier.

Demand is rising. During the third quarter of 2013, residential property transactions rose by 18% q-o-q to about 9,600 units, the strongest since the peak of 2007, according to REAS. Over the past four quarters, about 33,500 units were sold in the six Polish cities analysed.

Moreover, the total volume of outstanding housing loans rose by 3.7% to PLN335.93 billion (US80 billion) in November 2013 from the same period last year, according to the National Bank of Poland (NBP). About 50% of the total housing loans were denominated in zloty, an increase from 44% during the same period last year. The remaining 50% of the housing loans were denominated in foreign currencies, with majority of it denominated in Swiss Franc.

The average interest rate for outstanding zloty-denominated housing loans was 4.7% in November 2013, down from 6.9% during a year earlier, according to the NBP.

Poland house pricesPoland’s property market is expected to improve substantially in the next two years. “The years 2014-2015 may bring a period of visible and quite rapid improvement in market performance,” according to a REAS report.

In the third quarter of 2013, the Polish economy expanded by 1.9% from the same period last year, up from 0.8% annualized growth rate in the previous quarter, thanks to strong domestic demand, according to the CSO. The economy grew by 1.9% in 2012, after expanding by 4.5% in 2011, 3.9% in 2010, and 1.6% in 2009, according to the International Monetary Fund (IMF).

Analysis of Poland Residential Property Market »


RENTAL YIELDS
Last Updated: Apr 30, 2013



According to some indices residential prices are now rising once again in Warsaw. One reason – the data is confusing – may be that after a long period of price-declines, yields are now back to reasonable levels.

Apartments in Srodmiescie, which includes the historic neighborhoods of the Old Town (Stare Miasto) and the New Town (Nowe Miasto), are the most expensive in Warsaw.
Yet they are really not expensive, compared to the prime districts of other European cities. Srodmiescie apartment prices range from €2,662 to €3,108 per square metre (sq.m.), with gross rental yields ranging from 5.31% to 5.87%.

Mokotow, located just below Srodmiescie, houses many foreign embassies and companies. It ranks second in terms of property prices, after Srodmiescie. Prices for apartments here range from €2,037 to €2,880 per sq. m,.

Property investors can expect higher rental returns in Mokotow than in Srodmiescie on smaller apartments, whose rental yields average 7.32%.

Meanwhile, in the other popular Warsaw areas Ursynów, Wilanów, and Żoliborz, apartments are cheaper, ranging from €2,050 to €2,203. Property owners earn moderate rental returns, ranging from 5.51% to 5.83%.

In Krakow, average apartment prices range from €2,442 to €2,805 per sq. m. Apartment gross yields are a little less attractive year, ranging from 3.98% to 5.56%.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Jun 17, 2014



Rental Income: Net rental income is taxed at progressive rates, up to 32%.

Capital Gains: Capital gains incurred on properties sold within five years of acquisition are taxed at a 10% flat rate. Capital gains incurred on properties sold after a 5-year holding period are exempted from capital gains tax.

Inheritance: Gifts and inheritances of Polish property are taxed at progressive

Residents: Residents of Poland pay taxes on their worldwide income at progressive rates, up to 32%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Jun 18, 2014



Roundtrip transaction costs, i.e., the cost of buying and selling a property, are around 5.35% to 31.2%, with all costs falling on the buyer. For residential apartments, real estate agent’s fee is typically 3%.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jun 30, 2006



Rent: Rents can be freely negotiated between landlord and tenant. Rent indexation clauses are legal.

Tenant Security: However, the general situation over rental laws is worryingly unstable. Strict re-regulation of the rental sector was recently legislated by Parliament. Fortunately, it was declared unconstitutional shortly after coming into law. Populist pro-tenant feeling is strong.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jan 08, 2014


Poland: Modest economic growth in 2014

Poland GDP inflationPoland is Europe’s sixth-largest economy, with a population of about 38.5 million and a GDP per capita of US$13,334 in 2013, according to the International Monetary Fund (IMF).

The Polish economy is estimated to have expanded by just 1.3% in 2013 because of an economic slowdown in the first half of the year, according to the Central Statistical Office (CSO). But in September 2013, retail sales expanded by about 3.9% from a year earlier. Moreover, industrial production was also up by 6.2% over the same period.

In 2014, the economy is projected to grow by 2.4%, according to the IMF.  Poland is the only European country which avoided recession during the global financial and economic meltdown. The economy expanded by 5.1% in 2008, 1.6% in 2009 and 3.9% in 2010. GDP grew by 4.5% in 2011, mainly due to strong domestic demand. However in 2012, the economic growth slowed sharply to just 1.9%, the lowest since 2002, mainly due to the adverse impact of the eurozone debt crisis.

The country’s budget deficit was estimated at 3.5% of GDP in 2013, down from 3.9% of GDP in the previous year. In 2013, public debt stood at about 55% of GDP.

High unemployment remains a major problem. The country’s unemployment rate stood at 13.2% in November 2013, up from 13% in the previous three months and from 12.9% in a year earlier, according to the Ministry of Labor and Social Policy. This was in sharp contrast to the average unemployment rate of 8.8% from 2007 to 2011, according to the IMF. The total number of registered unemployed was 2.116 million in November 2013, up by 2.8% from the same period last year.

The average monthly nominal gross wages and salaries in the enterprise sector rose by 3.1% y-o-y in November 2013, to PLN3,897.9 (US$928). Likewise, the average monthly real wages and salaries increased by 2.5% over the same period.

The National Bank of Poland (NBP), the country’s central bank, decided to hold its benchmark interest rates steady at a record 2.5%, in an effort to buoy the economy. The central bank has indicated that there is not much chance of it increasing its record-low key rates before mid-2014.

In October 2013, the country’s overall inflation rate slowed to 0.8% from a year earlier, down from 1% in September and 1.1% in August 2013, mainly driven by falling fuel and food prices. This was far lower than the NBP target inflation rate of 2.5%.







  • Low transaction costs
  • Strong post-transition economy
  • Low to moderate rental yields
  • High rental income tax
  • Strong pro-tenant sentiments
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €3,108 For a 120 sq. m. property, usually an apartment.
Rental Yield: 5.51% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,711 For a 120 sq. m. property.
Income Tax: 17.44% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 18.28% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice.

Residential Market in Poland Q4 2013 - REASBaltic property back! Q1 2014 - NewsecPoland Report Q1 2014 - REASBaltic States Capitals 2014 - Ober Haus



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