Surprisingly, Poland's house prices are rising strongly by double-digit figures, despite weakening demand and supply.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

In the second quarter of 2024, the average price of existing flats in Poland's 7 big cities (Warsaw, Gdańsk, Gdynia, Kraków, Łódź, Poznań, and Wrocław) soared by 17.7% y-o-y to PLN 12,709 (€2,900) per square meter (sq. m), according to the Polish central bank, Norodowy Bank Polski (NBP). When adjusted for inflation, prices were still up by a huge 14.71% over the same period.

This was a sharp acceleration from the modest year-on-year price growth of 2.95% seen in the same period last year. In fact, it was the biggest annual increase recorded since Q4 2007.

Quarter-on-quarter, prices of existing flats in the country's 7 big cities rose by 3.8% (2.3% inflation-adjusted) in Q2 2024.

"In the last three quarters of 2024, the average price of apartments sold by developers has increased and is now approaching the asking prices of units on offer. Wealthier buyers who are accepting higher prices are more active" said JLL in its Q3 2024 report.

Poland's apartment price annual change

In Poland's major cities:

• In Warsaw, the average transaction price of existing flats rose strongly by 14.52% in Q2 2024 from a year earlier (11.61% inflation-adjusted). It was an acceleration from y-o-y price increases of 12.95% in Q1 2024, 8.92% in Q4 2023, 6.56% in Q3 2023, 3.86% in Q2 2023, and 6.68% in Q1 2023. It was also the biggest annual growth since Q1 2008. Quarter-on-quarter, prices were up by 2.44% (0.99% inflation-adjusted) in Q2 2024.
• Kraków experienced the biggest year-on-year price growth among the 7 big cities, at a whopping 30.36% (27.06% inflation-adjusted) during the year to Q2 2024, more than seven times the prior year's modest increase of 4.12%. In Q2 2024, prices rose by 6.73% (5.21% inflation-adjusted) from the previous quarter.
• Other Polish major cities also registered strong house price increases in Q2 2024 from the previous year, including Wrocław, with a house price growth of 21.36% (18.28% inflation-adjusted); Łódź, with house price growth of 19.42% (16.4% inflation-adjusted); Poznań, with a house price increase of 17.58% (14.6% inflation-adjusted); Gdynia, with house price growth of 15.09% (12.17% inflation-adjusted); and Gdańsk, with house price increase of 10.77% (7.96% inflation-adjusted).

Warsaw has Poland's most expensive housing, with an average transaction price for existing flats of PLN 15,123 (€3,451) per sq. m in Q2 2024, according to NBP. Housing is also expensive in Kraków, with an average price of PLN 14,585 (€3,329) per sqm, in Wrocław with PLN 12,420 (€2,834) per sq.m., and in Gdańsk with PLN 12,243 (€2,794) per sq. m.

Other major cities include Gdynia with an average house price of PLN 11,524 (€2,630) per sq. m, and Poznań with PLN 10,471 (€2,390) per sq. m.

Łódź has the cheapest houses among the 7 big cities, with an average price of PLN 7,602 (€1,735) per sq. m in Q2 2024.

Demand seems weakening. In Q3 2024, only Kraków saw a slightly quarterly increase in the number of flats sold, based on JLL figures. Warsaw saw zero growth in sales over the same period. Wrocław and Tri-City registered quarterly sales fall of 6% and 10%, respectively. The largest declines in sales were recorded in Poznań and Łódź of between 22% and 25% q-o-q in Q3 2024.

Overall, the number of flats sold in Poland's six largest markets totaled 9,200 units in Q3 2024, down by 6.9% from the previous quarter.

Prior to this, 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 in 2023. All of the country's largest markets saw a marked year-on-year increase in sales transactions last year.

Amidst cooling demand, supply is also declining. The total number of houses launched in the market in six major cities in the third quarter of 2024 was just about 12,600 units.

"Compared to the second quarter, the number of flats introduced to the market decreased the most in Łódź, Poznań and the Tri-City with declines of between 36% and 39%," said the JLL report.

Yet 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 0.3% during 2023, following strong expansions of 5.6% 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 2.8%. The International Monetary Fund's forecast is slightly more optimistic, expecting the Polish economy to grow by 3% for the full year of 2024.

During 2023, the country's GDP per capita climbed to US$22,086, up by a huge 18.1% from the prior year, based on IMF figures. In fact, the GDP per capita almost quadrupled in the past two decades.

Demand Highlights

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.

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 more than 84% higher in the first half of 2024 as compared to the previous peak, seen in 2008.

By major city, from 2008-peak to H1 2024:

• Krakow registered a speculator growth in house prices of 123.4% from 2008 to H1 2024.
• In Wrocław, house prices are up by a whopping 111.7% over the same period.
• In Gdańsk, house prices are now up by a huge 102.4% in H1 2024 from its 2008 peak.
• In Poznań, house prices are up by 92.8%.
• In Łódź, house prices are up by 89.1%.
• In Gdynia, house prices are up by 85.6%.
• In Warsaw, house prices are up by 67.2%

Demand is weakening

Residential property sales in Poland's major cities remain weak. In Warsaw, the number of flats sold was also unchanged in Q3 2024 as compared to the previous quarter, at about 3,000 units, based on JLL figures. On the other hand, Kraków saw a slight quarterly increase in sales, at 1,400 units.

In Wrocław, the number of flats sold fell by 6% q-o-q to 1,500 units in Q3 2024. Likewise, Tri-City also registered a sales decline of almost 10% q-o-q to 1,500 units over the same period.

The largest declines in sales were recorded in Poznań and Łódź of between 22% and 25% q-o-q in Q3 2024.

"According to our forecast, the sale of new apartments in the largest markets in the third quarter turned out to be on the weak side," said JLL in its Q3 2024 report. "In most cities, the results were lower than in the second quarter, and in the two cities that did relatively well, namely Krakow and Warsaw, sales were still at a low level for these markets. In total, in the six largest markets, developers sold around 9,200 flats in Q3 (-6.9% q/q)."

The market situation was especially challenging for sellers in Poznań and Łódź. At the sales rate observed in the third quarter, it would take two years to sell the current inventory in these two markets.

Prior to this, 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 report.

Accordingly, most cities also experienced a slowdown in the number of flats listed for sale. Overall, the new supply across the six major markets reached 12,600 units in Q3 2024.

Supply Highlights

Residential construction activity indicators showed mixed results

Indicators for residential construction activity in Poland are mixed, with dwelling permits and starts now rising but completions continue to fall.

During the year to end-Q3 2024:

• Dwelling permits rose strongly by 25.9% y-o-y to 219,421 units, following annual declines of 18.9% in 2023 and 12.6% in 2022, and increases of 23.6% in 2021, 2.8% in 2020, and 4.4% in 2019, according to the Central Statistical Office of Poland.
• Dwelling starts soared by 30.7% to 181,486 units in the first nine months of 2024 from the same period last year, following annual contractions of 5.6% in 2023 and 27.8% in 2022 and a growth of 23.9% in 2021.
• Dwelling completions fell by 9.6% y-o-y to 145,411 units in Jan-Sep 2024, following a decline of 7.2% in 2023 and annual growth of 1.6% in 2022, 6.3% in 2021, 6.5% in 2020, and 12.1% in 2019.

Housing stock continues to increase

There were around 15.78 million dwellings in Poland by the beginning of 2024, up by 1.3% from the previous year and by about 13% from a decade ago. The total useful floor area of dwellings recently reached 1.19 million square meters.

About 67.8% of the housing stock was built in the cities and urban areas while the remaining 32.2% was located in the rural areas.

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 & Young. Of the 15.78 million residential units in Poland, more than 60% 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 less than 20% 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 & Young. The lack of zoning plans causes administrative procedures to take from a few months to a year to resolve.

Rental Market

Moderately good rental yields; large rental market

Gross rental yields in Poland are moderately good, at an average of 6.03% in Q3 2024, up from 5.75% in Q1 2024, based on research conducted by the Global Property Guide.

The Warsaw district of Mokotow, located just below Srodmiescie, houses many foreign embassies and companies. Two-bedroom apartments in Mokotow are rented for about €1,400 per month, earning an average rental yield of 6.16% in Q3 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 4.46% to 6.55%.

In other major cities:

• In Wrocław, gross rental yields for apartments range from 4.73% to 6.31%, with a city average of 5.73%.
• In Kraków, rental yields range between 3.87% and 7.87%, with a city average of 5.97%.
• In Gdańsk, rental yields range between 4.16% and 6.67%, with a city average of 6.27%.
• In Łódź, rental yields for apartments range from 5.24% to 6.24%, with a city average of 5.86%.
• In Lublin, apartments offer yields from 5.49% to 6.27%, with a city average of 5.92%.
• In Poznań, apartments offer rental yields from 4.94% to 5.88%, with an average of 5.36%.

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 Market

Mortgage interest rates gradually falling, as the central bank keeps its key rates unchanged

In October 2024, Narodowy Bank Polski (NBP), Poland's central bank, kept its benchmark reference rate unchanged at 5.75% for the eleventh consecutive meeting, 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.

Poland's mortgage loan interest rates:

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.

During the latest policy decision, the Lombard rate was also kept steady at 6.25%, the deposit rate at 5.25%, the rediscount rate at 5.80%, and the discount rate at 5.85%.

"The Council decided to keep the NBP interest rates unchanged. 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 central bank in its October 2024 Monetary Policy press release. "NBP will continue to take all necessary actions in order 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 September 2024, the average interest rate for PLN-denominated outstanding housing loans stood at 7.16%, down from 7.4% a year earlier but still far higher than the 3.42% 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 7.51% in September 2024, down from 7.9% a year ago and 7.6% in the past two years.
• Maturity of over 5 years: the interest rate was 7.16% in September 2024, slightly down from 7.4% in September 2023 but still far higher than the 3.41% in September 2022.

For PLN-denominated new housing loans, the average interest rate stood at 7.61% in September 2024, lower than the previous year's 7.95% and far below the 8.96% recorded two years ago.

• Floating rate and up to 3 months initial rate fixation (IRF): the average interest rate was 7.84% in September 2024, down from 8.92% a year earlier and 9.44% two years ago.
• Over one-year IRF: the average interest rate was 7.51% in September 2024, down from 7.82% in September 2023 and 8.61% in September 2022.

The size of 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. In fact, the mortgage market has been noticeably contracting in the past three years, falling to just 13.2% of GDP in 2023, amidst high interest rates.

Yet, there have been some improvements recently. In August 2024, Poland's total outstanding real estate loans drawn by households rose by 4.1% to PLN473.87 billion (€108.64 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 August 2024:

• Zloty-denominated housing loans outstanding increased strongly by 9.5% y-o-y to PLN445.12 billion (€102.05 billion).
• CHF-denominated housing loans outstanding plunged by 54.6% y-o-y to PLN14.31 billion (€3.28 billion).
• Housing loans denominated by other foreign currencies fell by 16% y-o-y to about PLN14.45 billion (€3.31 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 about 6% in August 2024, 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 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 (€2.29) to PLN 20 (€4.59) per square meter.

Socio-Economic Contex

Economic conditions improving, but budget deficit widening

Poland's economy grew by a minuscule 0.3% during 2023, a sharp slowdown from the robust expansions of 5.6% 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.

The Polish economy is expected to gradually improve this year, with the European Commission projecting a modest real GDP growth rate of 2.8%. The International Monetary Fund's forecast is slightly more optimistic, expecting the Polish economy to grow by 3% for the full year of 2024.

"Economic growth is accelerating in 2024 led by recovering domestic demand. Private consumption has picked up as strong nominal wage growth coupled with lower inflation led to a sharp rebound in real wages. Fixed investment also continued its gradual recovery though remaining as a share of GDP below pre-pandemic levels," said the IMF in its October 2024 report.

"Net exports, however, are imposing some drag as imports recovered on the back of higher consumption while exports are held back by weak demand from the Euro Area," added the IMF.

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 5.1% of GDP last year, from shortfalls equivalent to 3.4% of GDP in 2022 and 1.8% in 2021, mainly due to the slowing economy.

"The economic slowdown contributed to the deterioration of headline balance through cyclical factors. In addition, the increasing spending on defense (2.7% of GDP), measures to mitigate the impact of high energy prices (0.6% of GDP) and the budgetary cost of hosting persons fleeing Ukraine (0.3% of GDP), combined with the adverse impact of the 2022 personal income tax reform, contributed to the increase in the deficit," said the European Commission.

The European Commission expects Poland's budget deficit to widen further to about 5.6% of GDP this year.

Government debt was equivalent to about 49.6% of GDP in 2023, slightly up from 49.2% in 2022, but still lower than the 53.6% of GDP in 2021 and 57.2% in 2020. During the pre-pandemic years, government debt stood at around 45.7% of GDP in 2019 and 48.7% in 2018.

Inflation is increasing again. In October 2024, the nationwide inflation rate accelerated to 5%, up from 4.9% in the previous month and the highest level seen in the past ten months, driven by a surge in energy and food prices, according to figures released by Statistics Poland.

Overall inflation averaged just 1.7% in 2010-20, before rising to 5.1% in 2021, 14.4% in 2022 and 11.4% in 2023.

Headline inflation is projected to be more manageable at 4.3% this year and 4.2% in 2025, according to the European Commission.

The labor market remains fundamentally strong. In September 2024, the unemployment rate stood at 5%, at par with the previous year, 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.

The total number of registered unemployed persons in the country fell to 769,600 in September 2024, down from 776,000 unemployed in the same period last year.

Sources:

1. Real estate market - Quarterly report (Narodowy Bank Polski): https://nbp.pl/
2. Residential market in Poland Q3 2024 (JLL): https://www.jll.pl/
3. Residential market in Poland Q4 2023 (JLL): https://www.jll.pl/
4. Residential construction in the period of January-September 2024 (Statistics Poland): https://stat.gov.pl/
5. Housing economy in 2023 (Statistics Poland): https://stat.gov.pl/
6. Gross rental yields in Poland: Warsaw and 7 other cities (Global Property Guide): https://www.globalpropertyguide.com/
7. Banking sector financial data (Narodowy Bank Polski): https://nbp.pl/
8. Interest rates statistics (Narodowy Bank Polski): https://nbp.pl/
9. Press release from the meeting of the Monetary Policy Council held on 1-2 October 2024 (Narodowy Bank Polski): https://nbp.pl/
10. Economic forecast for Poland (European Commission): https://economy-finance.ec.europa.eu/
11. Poland: Staff Concluding Statement of the 2024 Article IV Mission (International Monetary Fund): https://www.imf.org/
12. Republic of Poland (International Monetary Fund): https://www.imf.org/
13. Flash estimate of the consumer price index in October 2024 (Statistics Poland): https://stat.gov.pl/
14. Poland Government Debt to GDP (Trading Economics): https://tradingeconomics.com/
15. Unemployment rate 1990-2024 (Statistics Poland): https://stat.gov.pl/
16. Number of registered unemployed in 1990-2024 (Statistics Poland): https://stat.gov.pl/