Poland

Polish house prices continue to rise, albeit at a slower pace

Lalaine C. Delmendo

Poland’s housing market remains fundamentally strong, but house price growth is noticeably decelerating. Demand is now increasing sharply again, while construction activity continues to fall.

During 2023, the average price of existing flats in Poland’s 7 big cities (Warsaw, Gdańsk, Gdynia, Kraków, Łódź, Poznań, and Wrocław) rose by 5.5% y-o-y to PLN 11,286 (€2,634) per square meter (sq. m), according to the Polish central bank, Norodowy Bank Polski (NBP). However, when adjusted for inflation, prices dropped slightly by 0.66% over the same period.

This was a slowdown from annual increases of 9.63% in 2022, 11.63% in 2021, 10.22% in 2020, and 10.86% in 2019.

Quarter-on-quarter, prices of existing flats in the country’s 7 big cities rose by 4.24% (3.68% inflation-adjusted) in Q4 2023.

“It is worth noting that while in 2022 large increases in average apartment prices were partly due to a change in the mix of offerings (developers introduced units dedicated to wealthier customers), in 2023 an increase in average prices was observed in all quality segments, especially in the segment of basic (popular) standard apartments,” said JLL.

Poland’s house price annual change

In Poland’s major cities:

  • Warsaw registered one of the lowest house price growth in 2023, with the average transaction price of existing flats increasing by a modest 2.24% from a year earlier (and actually declined by 3,73% when adjusted for inflation). This is in sharp contrast to the previous year’s nearly 10% price surge. Quarter-on-quarter, prices were up 3.9% (3.35% inflation-adjusted) in Q4 2023.
  • Kraków experienced the biggest year-on-year price growth among the 7 big cities, at 10.93% (4.45% inflation-adjusted) during 2023, at par with the prior year’s 10.85% increase. In Q4 2023, prices rose by 4.13% (3.57% inflation-adjusted) from the previous quarter.
  • Other Polish major cities also registered strong house price increases last year, including Wrocław, with house price growth of 9.87% (3.45% inflation-adjusted); Łódź, with house price growth of 9.44% (3.05% inflation-adjusted); and Poznań, with a house price increase of 9.16% (2.79% inflation-adjusted).
  • Gdynia and Gdańsk saw modest price increases of 4.45% (-1.65% inflation-adjusted) and 2% (-3.96% inflation-adjusted), respectively.

Warsaw has Poland’s most expensive housing, with an average transaction price for existing flats of PLN 13,318 (€ 3,109) per sqm in 2023, according to NBP. Housing is also expensive in Kraków, with an average price of PLN 12,297 (€ 2,870) per sqm, in Gdańsk with PLN 11,503 (€ 2,685) per sq.m., and in Wrocław with PLN 11,112 (€ 2,594) per sq. m.

Other major cities include Gdynia with an average house price of PLN 10,171 (€ 2,374) per sq. m, and Poznań with PLN 9,506 (€ 2,219) per sq.m.

Łódź has the cheapest houses among the 7 big cities, with an average price of PLN 6,987 (€ 1,631) per sqm.

Demand rising strongly. During 2023, the total number of residential units sold in Poland’s six major cities – Warsaw, Tri-City, Kraków, Poznań, Wrocław, and Łódź – rose strongly by 65% y-o-y to around 57,500 units, according to JLL’s Q4 2023 Poland residential market report. All of the country’s largest markets saw a marked year-on-year increase in sales transactions last year.

Despite strong demand, the total number of houses launched in the market in six major cities in 2023 was just about 42,900 units.

“The last two years have been quite unusual in terms of new supply. First, in Q2 2022, despite the war in Ukraine and the drop in sales, developers motivated by regulatory changes (the introduction of the Developer’s Guarantee Fund) launched many more units than they sold, thus securing their ability to sell apartments under the “old rules”. This resulted in an oversupply,” said JLL. “In 2023, we observed a different situation. Sales skyrocketed and the supply side, despite a stock of new 2022 supply, could not keep up with demand. Developers launched 12% fewer apartments in the six largest markets throughout last year.”

Adding to the pressure is the falling residential construction activity. Dwelling permits dropped 18.9% y-o-y to 241,569 units in 2023. Over the same period, dwelling starts and completions also fell by 5.6% and 7.2%, respectively.

Poland remains one of the countries that is now seeing the highest interest from the Global Property Guide’s readers in Europe. Foreigners who are citizens or entrepreneurs from EEA countries (EU + Norway, Lichtenstein, Iceland) and Switzerland are free to buy any type of real estate. Foreigners from other countries may freely purchase condominium units throughout Poland, with the exception of areas located in the border zone.

Poland experienced a sharp economic slowdown in 2023, registering a real GDP growth rate of just 0.2% during 2023, following strong expansions of 5.1% in 2022 and 6.9% in 2021, mainly due to a decline in private consumption. This was even lower as compared to the average growth for the EU-27 of 0.6%. In fact, with the exception of the pandemic-induced contraction in 2020, the economic growth of Poland last year was the slowest since the early 1990s when the country was dealing with shocks from the transition to a free-market economy.

The Polish economy is expected to gradually improve this year, with the European Commission projecting a modest real GDP growth rate of 2.7%. The International Monetary Fund’s forecast is slightly more optimistic, expecting the Polish economy to grow by 2.8% for the full year of 2024.

Poland’s big property booms

Poland had one of Europe’s biggest housing booms pre-2008 global crisis, because of rapid economic growth, and has suffered less than others since.

Property prices surged in Warsaw during the boom - rising by 23% in 2005, 28% in 2006, an amazing 45% in 2007, and 13% in 2008, according to REAS. Other cities such as Wroclaw saw even larger house price rises.

However, during the 2008-09 crisis, the Polish zloty fell dramatically, and many mortgages – which were mainly denominated in foreign currencies – became unrepayable. The zloty lost more than 30% of its value against the euro in just seven months – from an average monthly exchange rate of PLN 3.2518 = €1 in July 2008 to PLN 4.6515 = €1 in February 2009.

Poland Monthly Average Exchange Rate graph

Home prices then fell for 6 straight years. House prices in Poland’s 7 major cities dropped 13.8% (-25.3% inflation-adjusted) from 2008 to 2013.

Prices started to rise again in 2014, and have been rising since then. House prices surged by nearly 9% annually from 2017 to 2022. In 2023, house price growth moderated to 5.5% and fell slightly by 0.7% when adjusted for inflation.

Due to the continuous price increase in the past several years, the average price of existing flats in Poland’s 7 big cities was almost 64% higher in 2023 as compared to the previous peak, seen in 2008.

By major city (from 2008 to 2023):

  • In Gdańsk, house prices are now up by a huge 90.2% in 2023 from its 2008 peak
  • In Wrocław, house prices are up 89.4% over the same period
  • In Krakow, house prices are up by 88.3%
  • In Poznań, house prices are up by 75.1%
  • In Łódź, house prices are up by 73.8%
  • In Gdynia, house prices are up by 63.8%
  • In Warsaw, house prices are up by 47.2%

Poland Residential Property Prices graph

Demand is increasing rapidly again

Demand is dramatically rising, despite high interest rates. During 2023, the total number of residential units sold in Poland’s six major cities – Warsaw, Tri-City, Kraków, Poznań, Wrocław, and Łódź – rose strongly by 65% y-o-y to around 57,500 units, according to JLL’s Q4 2023 Poland residential market report.

All of the country’s largest markets saw a marked year-on-year increase in sales transactions last year.

“Demand got an additional boost from the program supporting first-time apartment purchases, leading to the signing of some 60,000 loan agreements in 2023, of which probably around 35-40% were in the primary market, with around 10,000 transactions likely in the largest markets,” said JLL. “The “BK2” housing program was, therefore, a factor strongly supporting the demand side, further mobilizing, especially from the second quarter, the other groups of buyers to make faster purchase decisions.”

Yet, supply is not keeping up with demand. In 2023, the total number of houses launched in the market in six major cities was just about 42,900 units – far lower than the 57,500 units sold.

SALES & SUPPLY, 2023
Major cities No. of units sold No. of units put on the market y-o-y price change of units offered
Warsaw 19,100 14,500 21.4%
Tri-City 9,000 5,500 21.4%
Kraków 10,300 6,200 15.7%
Poznań 5,300 4,600 17.9%
Wrocław 8,400 5,100 14.0%
Łódź 5,400 7,000 14.9%
Total 57,500 42,900 -
Source: JLL

Residential construction activity weakens further

Residential construction activity in Poland continues to fall, amidst higher materials costs coupled with high interest rates. 

During 2023:

  • Dwelling permits dropped 18.9% y-o-y to 241,569 units, following a decline of 12.6% in 2022 and annual increases of 23.6% in 2021, 2.8% in 2020, and 4.4% in 2019, according to the Central Statistical Office of Poland. It was the second annual decline recorded since 2013.
  • Dwelling starts fell by a more moderate 5.6% to 189,093 units in 2023 from a year earlier, following a 27.8% contraction in the prior year and a 23.9% growth in 2021.
  • Dwelling completions fell by 7.2% y-o-y to 221,282 units, in contrast to annual growth of 1.6% in 2022, 6.3% in 2021, 6.5% in 2020, and 12.1% in 2019. It was the first year of decline since 2014.

Though there are signs of some improvement this year. In the first two months of 2024, dwelling permits surged by 32.7% to 41,912 units and dwelling starts soared 79% to 36,271 units as compared to the same period last year. However, completions were still down by 11.7% y-o-y to 30,810 units in Jan-Feb 2024.

Poland Residential Construction graph

Housing stock

There were over 15.6 million dwellings in Poland by the beginning of 2023, up by 1.4% from the previous year and by about 13% from a decade ago.

Poland has traditionally had the highest proportion of privately built dwellings. Developers typically build more than 60% of newly-completed dwellings annually, and private investors, less than 40%. But Poland’s housing stock is of low quality compared to the Western European average, according to Ernst and Young. Of the 15.6 million residential units in Poland, around 65% were built before 1989, mostly during the communist era using prefabricated technology, which tends to be of very poor quality.

Modern units built from 2000 onwards comprise only about 16% of the total and are concentrated primarily in six areas: Warsaw, Krakow, Poznan, Wroclaw, Tricity, and Lodz.

Poland’s housing supply constraint is “mainly administration-driven and consists of the limited number of zoning plans, covering below 30% of the country’s area”, according to Ernst and Young. The lack of zoning plans causes administrative procedures to take from a few months to a year to resolve.

Moderately good rental yields; large rental market

Gross rental yields in Poland are moderately good, at an average of 5.75% in Q1 2024, based on research conducted by the Global Property Guide in February 2024.

The Warsaw district of Mokotow, located just below Srodmiescie, houses many foreign embassies and companies. Two-bedroom apartments in Mokotow are rented for about €1,364 per month, earning an average rental yield of 6.21% in Q1 2024.

In the other popular Warsaw neighborhoods, such as Białołęka, Praga Południe, Wola, Bemowo, Downtown, Ursynow, and Bielany, apartments offer good rental returns ranging from 3.51% to 7.61%.

In other major cities:

  • In Wrocław, gross rental yields for apartments range from 4.75% to 7.24%, with a city average of 5.57%.
  • In Kraków, rental yields range between 3.44% and 6.09%, with a city average of 4.5%.
  • In Gdańsk, rental yields range between 4.4% and 7.62%, with a city average of 6.39%.
  • In Łódź, rental yields for apartments range from 5.05% to 6.09%, with a city average of 5.8%.
  • In Lublin, apartments offer yields from 5.61% to 6.16%, with an average of 5.85%.
  • In Poznań, apartments offer rental yields from 5.11% to 6.72%, with an average of 5.72%.

Renting is an unavoidable choice for more and more Poles, as stricter requirements for mortgage financing, uncertainty in the labor market, and low growth prospects, all discourage households from incurring long-term debt. The movement of people from other cities to the capital, especially students or young people looking for work, also drives people to rent.

About 21% of households in Warsaw rent apartments, with half of these in social and communal housing. Most residential properties in Poland are owned by private individuals.

About 10.7% of the dwelling stock is rented at lower rates, with 5.7% in communal or social housing, 2.1% in cooperative tenancy, 1.2% in state-owned companies, 1.2% in the State Treasury, and 0.5% in public building societies. The remaining dwelling stock is primarily owner-occupied.

Mortgage rates remain high, as the central bank keeps its key rates unchanged

In April 2024, Narodowy Bank Polski (NBP), Poland’s central bank, kept its benchmark reference rate unchanged at 5.75%, leaving it unchanged for six consecutive meetings, as the NBP took a cautious approach amidst an uncertain inflation trajectory. This followed rate cuts of 75 basis points in October 2023 and another 25 basis points in November 2023.

Before the recent shift in monetary policy, the central bank raised the key rate by a cumulative 665 basis points from a record low of 0.1% in September 2021 to 6.75% in October 2022, to rein in inflationary pressures.

Also, the rediscount rate and the deposit rate were unchanged at 5.80% and 5.25%, respectively.

“The Council judges that the current level of the NBP interest rates is conducive to meeting the NBP inflation target in the medium term,” said the NBP in its April 2024 Monetary Policy press release. “NBP will continue to take all necessary actions to ensure macroeconomic and financial stability, including above all to bring inflation down sustainably to the NBP inflation target in the medium term. NBP may intervene in the foreign exchange market.”

In February 2024, the average interest rate for PLN-denominated outstanding housing loans stood at 7.7%, slightly down from 7.87% a year earlier but still far higher than the 4.31% seen two years ago, according to figures from the NBP. Over the same period:

  • Maturity between 1 year and 5 years: the average interest rate was 7.71% in February 2024, down from 8.6% a year ago but sharply up from just 4.53% in the past two years.
  • Maturity of over 5 years: the interest rate was 7.7% in February 2024, slightly down from 7.86% in February 2023 but up from 4.31% in February 2022.

Poland Outstanding Housing Loans Interest Rates graph

For PLN-denominated new housing loans, the average interest rate remains high at 7.59% in February 2024, lower than the previous year’s 8.67% but still far higher than the 5.52% recorded two years ago.

  • Floating rate and up to 3 months initial rate fixation (IRF): the average interest rate was 7.9% in February 2024, down from 9.26% a year earlier and 5.45% two years ago.
  • Over 1-year IRF: the average interest rate was 7.52% in February 2024, down from 8.35% in February 2023 but up from 5.61% in February 2022.

Poland New Housing Loans Interest Rates graph

The mortgage market continues to shrink

The size of the Polish mortgage market has grown explosively - from only 1.3% of GDP in 2000, to nearly 22% of GDP in 2016. The market stabilized since. However, the mortgage market has been noticeably contracting in the past three years, falling to just 13.2% of GDP in 2023, amidst surging interest rates. 

Poland Housing Loans as Percentage of GDP graph

In February 2024, Poland’s total outstanding real estate loans drawn by households fell by 1.1% to PLN467.12 billion (€109.03 billion) from the same period last year, according to the NBP. After growing by an average of 6.4% in 2018-2021, real estate loans declined by 7.9% in 2022 and by another 3.6% in 2023.

In February 2024:

  • Zloty-denominated housing loans outstanding increased 6.9% y-o-y to PLN430.63 billion (€100.52 billion)
  • CHF-denominated housing loans outstanding plunged by 58.6% y-o-y to PLN20.83 billion (€4.86 billion)
  • Housing loans denominated by other foreign currencies fell by 18.6% y-o-y to about PLN15.67 billion (€3.66 billion)

Foreign currency-denominated housing loans (including Swiss franc loans) peaked at more than 69% of all loans in 2008. This caused a crisis when the currency collapsed. However, the proportion has since declined to less than 8% in February 2024, based on figures from the NBP.

Poland Housing Loans Outstanding graph

A more egalitarian housing subsidy

A recent subsidy program intends to redirect public funds toward social groups with significantly lower incomes, away from middle-income groups previously supported by other housing programs.

The Mieszkanie dla Mlodych (MdM) program was a housing subsidy program introduced by the government in early 2014, aimed at helping young people aged up to 35 (either single or married) buy their first new flat.

The MdM program was replaced by the “National Housing Program” at the end of 2016 by the Law and Justice Party (PiS)-led government. Based on government estimates, about 40% of people in Poland, a nation of almost 38 million people, cannot afford to rent an apartment. Construction of affordable housing units for rent and giving renters a purchase option under the program began in 2018, with rents ranging from around PLN 10 (€2.30) to PLN 20 (€4.70) per square meter.

Sharp economic slowdown, easing inflation

Poland’s economy grew by a minuscule 0.2% during 2023, a sharp slowdown from the robust expansions of 5.1% in 2022 and 6.9% in 2021, mainly due to a decline in private consumption and the change in inventories. This was even lower as compared to the average growth for the EU-27 of 0.6%.

In fact, with the exception of the pandemic-induced contraction in 2020, the economic growth of Poland last year was the slowest since the early 1990s when the country was dealing with shocks from the transition to a free-market economy.

Poland GDP Growth and Inflation graph

The Polish economy is expected to gradually improve this year, with the European Commission projecting a modest real GDP growth rate of 2.7%. The International Monetary Fund’s forecast is slightly more optimistic, expecting the Polish economy to grow by 2.8% for the full year of 2024.

“Economic growth is set to accelerate to 2.7% in 2024. Private consumption is expected to be the main growth driver, supported by rising real wages, additional government social support, and receding inflationary pressures. Public consumption is also set to contribute robustly to growth on the back of new additional fiscal support measures,” said the European Commission. 

“However, net exports are projected to contribute negatively, as rising domestic demand is expected to fuel imports. Investment is set to be held back by a slower start of EU funds flows from the 2021-27 programming period,” the Commission added.

The Polish economy had been expanding by a modest 3.6% annually from 2009 to 2019, before experiencing a pandemic-induced contraction of 2% in 2020.

Poland’s government fiscal deficit widened to about 5.6% of GDP last year, from shortfalls equivalent to 3.7% of GDP in 2022 and 1.8% in 2021, mainly due to the slowing economy. The government targets a deficit equivalent to 4.5% of GDP this year but market analysts estimated a higher shortfall of around 6%.

Government debt was estimated at 50% of GDP in 2023, slightly up from 49.1% in 2022, but still lower than the 53.6% of GDP in 2021 and 57.5% in 2020. During the pre-pandemic years, government debt stood at around 45.6% of GDP in 2019 and 48.8% in 2018.

Inflation continues to ease. In March 2024, the nationwide inflation rate slowed to just 1.9%, down from 2.8% in the previous month and from 16.1% in the same period last year, mainly due to the decline in electricity and fuel prices, according to figures released by Statistics Poland. It was the lowest reading since March 2019. Overall inflation averaged just 1.7% in 2010-20, before rising to 5.1% in 2021, 14.4% in 2022 and 10.9% in 2023.

“Inflation peaked in early 2023 and eased rapidly in the second half of the year due to decelerating commodity and food prices,” said the European Commission. “Lower energy commodity price assumptions are set to further curb inflation throughout 2024 and 2025.”

The labor market remains fundamentally strong. The unemployment rate stood at 5.4% in February 2024, unchanged from the previous month but slightly down from 5.5% a year earlier, according to Statistics Poland. From an average of 11.7% in 2011-2016 period, the jobless rate dropped sharply to an average of 5.9% in 2017-2023.

Likewise, the number of unemployed fell to 845,300 in February 2024, down from 864,800 unemployed people in the previous year.

Poland Unemployment Percentage graph

Sources:

Poland - More data and information