Poland: Overview
Last Updated:
Jun 30, 2009
After strong increases from 2004 to 2007, property prices in Poland either stagnated or declined in 2008. The decline continued in Q1 2009 and prices are expected to keep on falling until 2010, at the least.
In Q1 2009, the average asking price of ‘exposed’ units in Warsaw, the capital, was relatively unchanged from a year earlier (an increase of 0.36% y-o-y), according to REAS, the country’s premier housing consulting firm. When adjusted for inflation, the average price actually dropped by 3.1%.
(Exposed units are properties that are already in the market as opposed to units newly-launched by developers.)
REAS figures showed severe price falls in other major cities in Poland. The average price of exposed units plunged by 25% in Wroclaw, 16.8% in the Tri-City (Gdansk, Sopot and Gdynia), 15.7% in Poznan and 8.9% in Lodz to Q1 2009 from a year earlier. In Krakow and Katowice, average prices fell 3.4% and 1.9%, respectively, over the same period.
While the economy is expected to recover quickly in 2010 with a 1.3% expansion after a 0.8% contraction in 2009, housing demand is expected to fall tremendously. Home purchases are likely to be delayed due to higher unemployment rate and lower wage growth.
Foreigners can freely buy condominium units in Poland. Buying land is a bit trickier. Generally, a permit from the Ministry of Internal Affairs is needed.
In Q1 2009, the average asking price of ‘exposed’ units in Warsaw, the capital, was relatively unchanged from a year earlier (an increase of 0.36% y-o-y), according to REAS, the country’s premier housing consulting firm. When adjusted for inflation, the average price actually dropped by 3.1%.
(Exposed units are properties that are already in the market as opposed to units newly-launched by developers.)
REAS figures showed severe price falls in other major cities in Poland. The average price of exposed units plunged by 25% in Wroclaw, 16.8% in the Tri-City (Gdansk, Sopot and Gdynia), 15.7% in Poznan and 8.9% in Lodz to Q1 2009 from a year earlier. In Krakow and Katowice, average prices fell 3.4% and 1.9%, respectively, over the same period.
While the economy is expected to recover quickly in 2010 with a 1.3% expansion after a 0.8% contraction in 2009, housing demand is expected to fall tremendously. Home purchases are likely to be delayed due to higher unemployment rate and lower wage growth.
Foreigners can freely buy condominium units in Poland. Buying land is a bit trickier. Generally, a permit from the Ministry of Internal Affairs is needed.
Read Price History »
RENTAL YIELDS
Last Updated: Apr 30, 2009
Gross rental yields on apartments in Srodmiecie, Warsaw, stand at an average of 5.38%, according to the Global Property Guide. Yields on apartments in other areas of Warsaw are higher, at 6.36%.
Krakow apartments now have gross rental yields of only 4.44%, perhaps partly reflecting the 9% price rises occuring during the past year.
Economic gloom has settled on Poland. Nevertheless, the 1st quarter of 2009 saw the average price per square metre of Polish apartments appreciate 5% over the same period last year, according to the real estate site Mamdom. In Warsaw, prices of residential apartments remained unchanged during 2008, while the average price of apartments newly introduced to the market rose 2% during the quarter to end-Q1 2009, according to real estate consultancy service REAS.
While there is a significant overhang of new buildings, developers have drastically reduced the number of buildings started, due to banks’ increasing caution, as well as decreased demand.
The number of apartments launched in the first quarter of 2009 was nearly 5 times down on the first quarter of 2007, and over 3 times lower than the first quarter of 2008, according to REAS. In Warsaw, the number of new apartments launched was 4 times down in Q1 2009 compared to the same period last year. There were 1,600 residential units sold in the first quarter 2009, compared to the average of the 3,000 – 4,000 in first quarter of 2008.
TAXES AND COSTS
Last Updated: Oct 10, 2007
Effective Tax Rate on Rental Income |
|||
| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 17.4% | 19.4% | 19.7% |
| Click here to see a worked sample | |||
Source:
Disclaimer
|
|||
Rental Income: Taxes on rental income can be high in Poland, at rates of 19%, 30% and 40%. Value Added Tax is imposed on income from the lease of residential buildings at 22%.
Capital Gains: Capital gains incurred for properties sold within five years of acquisition are taxed at a 10% flat rate.
Inheritance: Gifts and inheritances of a Polish property are not taxable if both the deceased and the heir are not Polish nationals or Polish residents.
Residents: Residents of Poland pay taxes on their worldwide income.
Capital Gains: Capital gains incurred for properties sold within five years of acquisition are taxed at a 10% flat rate.
Inheritance: Gifts and inheritances of a Polish property are not taxable if both the deceased and the heir are not Polish nationals or Polish residents.
Residents: Residents of Poland pay taxes on their worldwide income.
BUYING GUIDE
Last Updated: Mar 29, 2007
Roundtrip transaction costs, i.e., the cost of buying and selling a property, are around 5.5% - 9.9%, with all costs falling on the buyer. For residential apartments, real estate agent’s fee is typically 3%. Civil Transaction Tax of 2% is paid on transfer of second-hand buildings. Reduced VAT of 7% is levied on transfer of new-build residential property until 31 December 2007.
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.
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.
ECONOMIC GROWTH
Last Updated: Jun 30, 2009
Global recession stalls economic boom
Poland was the first country in post-Communist Europe to embrace rapid economic liberalization at the beginning of the 1990s. Poland has a population of 38.5 million and a 2007 GDP/capita of US$9,594 (IMF). Poland joined the EU in 2004, NATO in 1999, and the Organization for Economic Cooperation and Development (OECD) in 1996. After a massive privatization program referred to as ‘shock-treatment’ transition in the 1990s, the economy grew by an average of 5.4% annually from 1993 to 2001. Although growth stalled in 2001 and 2002 due to global economic slowdown, the economy bounced back and expanded by an average of 4.8% annually from 2003 to 2006.
In 2007, GDP growth was 6.52%, the highest since 1997. Real private sector wages rose 4.2% in 2006 and 6.7% in 2007. Unemployment dropped dramatically to 11.2% in 2007 from 19.6% in 2003.
The global economic slowdown and financial meltdown pushed economic growth to slow down to 4.8% in 2008. The economy is expected to contract by less than 1% in 2009 and an immediate recovery is seen in 2010. Nevertheless, ordinary citizens are likely to feel the crunch. Unemployment is expected to rise 11.4% in 2009 and 13.5% in 2010. Nominal wages are also expected to fall by as much as 20% in 2009.
The political situation has greatly improved since the resignation of former prime minister Jaroslaw Kaczynski, head of the conservative Law and Justice party, who had opposed rapid free-market reforms and favoured retaining social welfare programmes. His calls for a return to Christian values and "moral change" were combined with a strong streak of xenophobia. His identical twin Lech Kaczynski remains President, but under the Polish constitution, the president has fewer powers than the prime minister, though he has a significant say in foreign policy.
After the victory of the centre-right Civic Platform in October 2007, Donald Tusk formed a government. The Civic Platform party is governing in coalition with the centrist Peasants Party.
Tusk wants better relations with the EU, however, dreams of adopting the euro as official currency is still unlikely for the next four to five years. He has also promised to calm Poland's tense relations with Russia, which have been at their lowest ebb since Warsaw broke free from the communist bloc in 1989.
