Poland Residential Real Estate Market Analysis 2022

Poland’s housing market growth is slowing, with market sentiment adversely affected by continued pandemic fears, coupled with the ongoing Russian invasion of Ukraine, and surging inflation.

The average price of existing flats in Poland’s 7 big cities (Warsaw, Gdańsk, Gdynia, Kraków, Łódź, Poznań, and Wrocław) rose by 9.3% y-o-y in Q1 2022 to an average of PLN 9,634 (€2,011) per square metre (sq. m), according to the Polish central bank, Narodowy Bank Polski (NBP). However much of that is inflation. When adjusted for inflation, prices actually fell slightly by 0.4%. 

Source: Central Bank of Poland

In Poland’s major cities:

  • In Warsaw average house prices rose by 5.1% during the year to Q1 2022 (but declined by 4.2% when adjusted for inflation). This is down from the previous year’s 8.9% price rises.
  • Kraków saw the highest house price rise among Poland’s seven major cities, with a 19.5% (9% inflation-adjusted) y-o-y price surge in Q1 2022.
  • Other Polish major cities also enjoyed high price rises, including Gdynia, with house price growth of 15.3%, Łódź (14.4%), Wrocław (14.2%), and Gdańsk (9.9%).
  • Among the 7 big cities, Poznań saw the second lowest price increase of 5.2% during the year to Q1 2022, with prices falling by 4% when adjusted for inflation.

Warsaw has Poland’s most expensive housing, with an average transaction price for existing homes of PLN 11,451 (€ 2,391) per sq. m. in Q1 2022, according to NBP. Housing is also expensive in Gdańsk, with an average price of PLN 10,239 (€ 2,138) per sq. m., and in Kraków with PLN 10,001 (€ 2,088) per sq. m. Other major cities include Gdynia with PLN 9,245 (€ 1,930) per sq. m., and Wrocław with PLN 9,202 (€ 1,922) per sq. m.

Łódź has the cheapest houses among the 7 big cities, with an average price of PLN 6,214 (€ 1,298) per sq. m.

Demand is also slowing. In the first quarter of 2022, the total number of new flats sold in the country’s six major cities was close to 10,400 units, down by 31% from the previous quarter and by 46% from an exceptionally high Q1 2021 result, according to JLL’s Q1 2022 Residential Market report. This is in sharp contrast to 2021, when new flats sold surged by more than 30% to 69,000 units from a year earlier, following a 19% decline in 2020.

“In Q1, the sentiment of market participants was affected by strong negative factors: the pandemic fears prevailing in January, the shock of the outbreak of war in Ukraine in late February, and the rapidly rising inflation throughout the entire three months,” said JLL.

Despite the falling sales, 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 from 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’s economy grew by about 5.9% during 2021, a sharp turnaround from the previous year’s 2.2% decline, according to the European Commission. The economy is expected to grow by another 5.2% this year.

Poland’s big property booms

Poland had one of Europe’s biggest housing booms pre-2008, 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.

Poland exchange rate

However during the 2008-09 crisis the Polish zloty fell dramatically, and many mortgages – which were mainly denominated in foreign currencies - became unrepayable.

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.

Poland Residential prices 7 major cities

Prices started to rise again in 2014, and have been rising since then. House prices surged by about 9.5% annually from 2017 to 2021.  

The average price of existing flats in Poland’s 7 big cities was more than 37% higher in 2021 than at the previous peak, seen in 2008.

By major city:

  • In Gdańsk, house prices are now up by 68.8% compared to 2008
  • In Łódź, house prices are up by 53.2% over the same period
  • In Wrocław, house prices are up 52.6%
  • In Krakow, house prices are up 49.8%
  • In Gdynia, house prices are up 44.1%
  • In Poznań, house prices are up 34.1%
  • In Warsaw, house prices are up 24.8%

Demand is slowing

Demand is showing signs of slowdown, amidst increased uncertainty and a decline in purchasing power due to soaring inflation. In the first quarter of 2022, the total number of new flats sold in the country’s six major cities was close to 10,400 units, down by 31% from the previous quarter and by 46% from an exceptionally high Q1 2021 result, according to JLL’s Q1 2022 Residential Market report.

“The highest drops in sales were recorded in Warsaw and Poznań (by 37% q/q, and 54–55% y/y), whereas the smallest – in the Tri-City (21% q/q, and 34% y/y),” said JLL.

This is in sharp contrast to the full year of 2021, when new flats sold in the country’s six major cities surged by more than 30% to 69,000 units from a year earlier, following a 19% decline in 2020.

By end-Q1 2022, developers had 40,300 units on offer, up by 8% from the previous quarter but down by 4% when compared to a year ago.

Sales & Supply, Q1 2022

Major Cities No. of Units Sold No. of Units Launched for Sale No. of Units Offered for Sale
Warsaw 3,100 4,300 10,900
Tri-City 1,800 2,600 6,300
Kraków 1,800 2,600 8,400
Poznań 1,000 1,200 4,300
Wrocław 1,700 1,400 5,700
Łódź 1,000 1,400 4,700
Total 10,400 13,500 40,300
Source: JLL

Residential construction activity has strengthened

Residential construction activity rose strongly last year, amidst easing of pandemic-related measures.

During 2021:

  • Dwelling permits: 340,613 units, up by 23.4% from a year ago, according to the Central Statistical Office of Poland.
  • Dwelling starts: 277,425 units, up 23.9% from a year earlier
  • Dwelling completions: 234,718 units, up 6.5% from a year ago

In the first half of 2022, construction indicators showed mixed results. Dwelling completions rose by a modest 3.8% y-o-y to 109,411 units while permits were more or less steady at 170,803 units. In contrast, dwelling starts fell by 17.2% to 119,707 units in H1 2022 from the same period last year.

Poland has traditionally had a highest proportion of privately-built dwellings.  In 2021, developers built 60.4% of newly-completed dwellings, private investors, 37.6%.  But Poland’s housing stock is of low quality compared to the Western European average, according to Ernst and Young. Of the 15.2 million residential units in Poland in 2021, around 65% were built before 1989, mostly during the communist era using prefabricated technology, which tends to be of very poor quality.

Poland residential constructions

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. There were nearly 15.2 million dwellings in Poland in 2021, up 12.6% from a decade ago, according to the National Population and Housing Census 2021.

Poland’s housing supply constraint is “mainly administration-driven and consists of the limited number of zoning plans, covering below 30% of 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.

Good rental yields in Warsaw and Krakow; renters plentiful

Gross rental yields in Warsaw range from 5.50% to 6.75%. In Krakow, rental yields range from 5.66% to 6.47%, based on Global Property Guide research.

The Warsaw district of Mokotow, located just below Srodmiescie, houses many foreign embassies and companies. A 120 sq. m. apartment in Mokotow offers rental yields averaging 6.61%.

Apartments in Srodmiescie, which includes the historic neighborhoods of the Old Town (Stare Miasto) and the New Town (Nowe Miasto), offer gross rental yields ranging from 5.50% to 6.75%.

In the other popular Warsaw areas, Wilanów and Żoliborz, apartments offer good rental returns ranging from 5.82% to 6.38%.

Aside from attractive rental yields, another plus is the low transaction costs in Poland.

Renting is an unavoidable choice for more and more Poles, as stricter requirements for mortgage financing, uncertainty in the labour 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% the State Treasury, and 0.5% in public building societies. The remaining dwelling stock is primarily owner-occupied.

Mortgage rates rising sharply, following key rate hikes

The average interest rate for PLN-denominated outstanding housing loans was 6.26% in May 2022, sharply up from 2.28% a year earlier, according to the NBP. Over the same period:

  • For outstanding housing loans with maturity between 1 year and 5 years the interest rate was 6.36% in May 2022, up from 2.79% a year ago.
  • For housing loans with maturity of over 5 years the interest rate was 6.26%, up from the previous year’s 2.28%.

For PLN-denominated new housing loans, the average interest rate stood at 7.21% in May 2022, almost tripled the 2.85% in May 2021.

Likewise, the average interest rate for EUR-denominated new housing loans was 4.2% in May 2022, up from 3.5% a year ago.

In July 2022, Narodowy Bank Polski (NBP), Poland’s central bank, raised its benchmark reference rate by 50 basis points to 6.5%, its tenth consecutive rate hike from just 0.1% in September 2021, in an effort to ease inflationary pressures. It was the highest level since March 2005. Also, the rediscount rate and the deposit rate were raised to 6.55% and 6%, respectively.

Poland interest rates outstanding housing loans

“The Council assessed, that there persists a risk of inflation running above the NBP inflation target in the monetary policy transmission horizon. In order to reduce this risk, i.e. striving to decrease inflation to the NBP target in the medium term, the Council decided to increase NBP interest rates again. The increase of the NBP interest rates will also curb inflation expectations,” said the NBP in its July 2022 Monetary Policy press release.

“Further decisions of the Council will depend on incoming information regarding perspectives for inflation and economic activity, including the impact of the Russian military aggression against Ukraine on the Polish economy.”

The Polish mortgage market has boomed

The Polish mortgage market has grown explosively - from only 1.3% of GDP in 2000, to 21% of GDP in 2021.

Poland housing loans

In June 2022, Poland’s total outstanding housing loans rose by 4.3% to PLN 526.86 billion (€ 110.15 billion) from the same period last year, according to the NBP. Over the same period:

  • Zloty-denominated housing loans outstanding rose by 6.6% y-o-y to PLN 418.66 billion (€ 87.55 billion).
  • Foreign currency-denominated housing loans fell by 3.6% y-o-y to about PLN 108.2 billion (€ 22.64 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 20.5% in June 2022, based on figures from the NBP.

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 programme 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 (€2.1) to PLN 20 (€4.2) per sq. m.

Strong economic growth; increasing inflationary pressures

Poland’s economy expanded by a robust 5.9% during 2021, a sharp turnaround from the previous year’s 2.2% contraction, amidst the gradual easing of pandemic-related measures, according to the European Commission. In fact, it was the highest growth in fourteen years.

The economy is projected to expand by another 5.2% this year.

“The outlook for the Polish economy over the medium term remains favorable, with minimal scarring expected from the pandemic,” said the International Monetary Fund (IMF). “Fiscal policy has supported employment during the pandemic and bolstered corporate balance sheets, which provide a strong foundation for further private investment.”

Poland’s government fiscal deficit fell from 7.1% of GDP in 2020 to 2.9% of GDP in 2021, driven mainly by the reduction in pandemic-related fiscal support, according to the IMF.

Poland unemployment

Government debt was estimated to have fallen to 56% of GDP in 2021, slightly down from 57.5% in 2020 but still far higher than the 45.6% in 2019 and 48.8% in 2018.

The labour market continues to improve. Unemployment stood at 4.9% in June 2022, down from 5.1% in the previous month and 6% a year earlier, based on figures from Statistics Poland. In fact, it was the lowest jobless rate registered since 1990. Likewise, the number of unemployed fell to 841,500 in June 2022, sharply down from 1.02 million unemployed people in the previous year.

However, inflationary pressures continue to rise. In June 2022, nationwide inflation skyrocketed to 15.5%, the highest since October 1996, according to Statistics Poland, amidst surging energy and grain prices due to the war in Ukraine. Overall inflation averaged 1.7% in 2010-20, before rising to 5.1% in 2021.

Is this the end of Poland’s row with the EU?

Last November 2021, the EU’s top court ruled against Poland on judicial appointments, stating that Polish rules allowing the justice minister to assign judges to higher courts or to remove them without declaring the reasons violated EU law. In addition, the EU’s top court ruled Poland must pay €1 million per day in fines for maintaining a disciplinary chamber for judges, deepening a row over judicial independence.

In response Polish President Andrzej Duda submitted legislation in February 2022 to dismantle the controversial disciplinary chamber for judges, hoping to end Poland’s dispute with Brussels and unblock EU funding.

poland gdp inflation

Then in June 2022, President Duda finally signed the changes to the disciplinary regulations into law and replaced the controversial body that disciplined judges with a new accountability panel, in hopes that the EU will finally release pandemic recovery funds after it met the bloc’s demands in the rule-of-law dispute.

The conflict has been brewing since the populist Law and Justice Party (PiS) candidate Andrzej Duda won the presidential elections in May 2015 and the PiS party won the majority of seats in November 2015.

In 2017, the EU took the first steps toward stripping the country of its voting rights – a penalty never previously imposed on any member nation.

Despite this, Poland continued with its “reforms”, formally introducing a law in July 2018 that lowers the retirement age for judges from 70 to 65. This triggered widespread street protests after more than 20 judges (about a third of the total) were forced to retire. Despite this, the Polish government passed a law in January 2020 that makes it possible for judges to face disciplinary actions if they make rulings that the government does not agree with – a move that the EU strongly opposes.

In fact, Poland, together with Hungary, vetoed EU’s budget plan in 2020, delaying the release of the bloc’s landmark stimulus package, worth €1.8 trillion, because they oppose the tie between disbursing EU funds and compliance to European values, the so-called rule-of-law mechanism.