Polish property bubble

From Wikipedia, the free encyclopedia

 This article or section needs to be wikified to meet Wikipedia's quality standards.
Please help improve this article with relevant internal links. (June 2007)
This article needs additional citations for verification.
Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (June 2007)

Over the last 4 years real estate prices in Poland have increased drastically. Between June 2006 and June 2007, according to http://oferty.net/statystyki/062007.php, the average price of a square metre in Warsaw rose from 6683 PLN (1636 EUR) to 9540 PLN (2519 EUR) (over 50% rise in EURO terms).

According to the largest Polish newspaper, Gazeta Wyborcza: http://dom.gazeta.pl/nieruchomosci/1,73497,4333598.html?as=2&ias=4 the average monthly salary in Warsaw buys 0.26 sq m, or in Kraków 0.22 sq m.

Same sources give rental profitability at 4% yearly: http://dom.gazeta.pl/nieruchomosci/1,73497,4333598.html?as=3&ias=4. This is lower than interest rates on bank deposits (5% in Polbank etc.).

In early 2007 the Polish property market began to show early signs of a property bubble; these included:

  • banks increasing loan periods from 30 to 50 years to extend credit limits
  • over 1 million families already in debt, and roughly 300,000 more going in debt every year
  • increasing interest rates - analysts predict 6% by the end of 2007 (from less than 4% in 2006)
  • number of new apartments for sale in Warsaw at one of the oldest Polish real estate portals: tabelaofert.pl increased from around 1750 in November 2006 to over 4300 in June 2007
  • exotic companies declaring real estate development plans
  • Polish economy showing signs of the overheating due to government incompetence: from 2005 to 2007 the forex deficit almost tripled (it had been decreasing in previous years); imports, which were decreasing (by 5%) in 2005, jumped to a 25% increase in 2007. Social unrest grows.

The arguments for further real estate prices rise are:

  • fast increase of salaries - around 8% per year
  • little average housing per person (though this may be argument in the opposite as too high prices - much over affordability of the population lead to overcrowded housing)
  • money repatriated by Poles who have emigrated
  • rapid urbanization - the population of rural areas and small towns is declining rapidly, while the population of major urban areas is increasing quickly
  • Warsaw has a population of only 2 million – approximately 5% of the whole of the country – very low for a capital city

In the long term, property prices are unlikely to grow too high for demographic reasons:

  • children of the 1980s demographic boom have finished their education
  • it is estimated that over 2 million Poles have emigrated since Poland joined the EU in 2004
  • fertility in Poland is among lowest in Europe - less than 1.3 children per woman at reproductive age
  • only limited immigration into Poland is expected - Poland had no colonies, is not very rich, has long, cold winters and the Polish language is little used outside Poland and relatively hard to learn.