Polands property market - no need to panic

It was standing room only at the Polonia
Palace Hotel for the BPCC’s British Polish
Real Estate Forum, with delegates all
anxious to hear which way the Polish market
was heading. The event took place as the credit
crunch claimed more victims in the US, UK
and western Europe and as the White House
deliberated its emergency bail-out plan.

Meanwhile, in Poland, the key message from
economist Richard Mbewe and from real estate
practitioners was that the property bubble will
not burst. In the UK, the residential mortgage
debt to GDP ratio had reached 83% by the end
of 2006 (the latest fi gures available from the
European Mortgage Federation), while in Poland
it had grown (albeit very rapidly from a
low base) to 8.3%. Total outstanding mortgage
lending in Poland €41 billion, compared to
€1,584 billion in the UK.

There are some issues on the Polish
market that need to be addressed. There has
been a serious mismatch between the type
of housing unit being built by developers
(middle and high-end) and what the market
needs (low end). Many developers who have
built expensive luxury apartments in prime
city centre locations are left with unsold
units, as the demand for this type of property
among rich Poles had been overestimated. On
the other hand, the hundreds of thousands
of young, educated Poles migrating into
Poland’s largest high-growth cities, need
affordable and basic housing.

The buy-to-let market was spotlighted as
a good opportunity, as a credit squeeze will
affect developers and home buyers alike.
Potential buyers waiting to see if property
prices fall further before buying will also add
to the demand for lettings, said Michael Clay,
partner at Davidoff Kleeberg and Maresch,
who pinpointed Warsaw, Krakow and upand-
coming Łódź as buy-to-let hotspots.

It was standing room only at the Polonia
Palace Hotel for the BPCC’s British Polish
Real Estate Forum, with delegates all
anxious to hear which way the Polish market
was heading. The event took place as the credit
crunch claimed more victims in the US, UK
and western Europe and as the White House
deliberated its emergency bail-out plan.

Meanwhile, in Poland, the key message from
economist Richard Mbewe and from real estate
practitioners was that the property bubble will
not burst. In the UK, the residential mortgage
debt to GDP ratio had reached 83% by the end
of 2006 (the latest fi gures available from the
European Mortgage Federation), while in Poland
it had grown (albeit very rapidly from a
low base) to 8.3%. Total outstanding mortgage
lending in Poland €41 billion, compared to
€1,584 billion in the UK.

There are some issues on the Polish
market that need to be addressed. There has
been a serious mismatch between the type
of housing unit being built by developers
(middle and high-end) and what the market
needs (low end). Many developers who have
built expensive luxury apartments in prime
city centre locations are left with unsold
units, as the demand for this type of property
among rich Poles had been overestimated. On
the other hand, the hundreds of thousands
of young, educated Poles migrating into
Poland’s largest high-growth cities, need
affordable and basic housing.

The buy-to-let market was spotlighted as
a good opportunity, as a credit squeeze will
affect developers and home buyers alike.
Potential buyers waiting to see if property
prices fall further before buying will also add
to the demand for lettings, said Michael Clay,
partner at Davidoff Kleeberg and Maresch,
who pinpointed Warsaw, Krakow and upand-
coming Łódź as buy-to-let hotspots.

Kazimierz Kirejczyk from REAS presented
a detailed picture of Polish demographics
over the next 40 years. He pointed out the
large infl ux of young Poles (mainly female)
to Poland’s largest cities, is creating a huge
demand for basic units. A rising proportion
of singles and ‘dinky’ (dual income no kids
yet) households suggests that more, smaller
units will be required. At the same time,
fertility rates have been declining, and the
population aging. Mr Kirejczyk says that
aging ‘empty nesters’ will head out of the
cities, beyond the suburbs, and revitalise
rural areas. The over-65s, currently one in
eight of Poland’s population, will form one
in four of the population by the early 2040s.

In the short term, the froth will go out of
the residential property market, but it will not
collapse. Many developers, especially those
who’ve only recently entered the market,
will go out of business, leaving tasty morsels
to pick up, said Dr Mbewe, who forecast the
slowdown to last until some time between
the third quarter of 2009 and the second
quarter of 2010. The fundamentals, he said,
were sound, with Poland still in need of
around 1.2 million flats.

Of crucial importance to all real estate
practitioners in Poland are issues connected
with planning permission. Henryk
Romańczuk, partner at Wierzbowski
Eversheds presented the latest amendments
to the law to streamline proceedings for
building permits and planning permission.

The commercial stream focused on the
opportunities in Poland's offi ce and retail
markets. The fi nal presentation took a close
look at the delivery of UEFA EURO 2012.

King Sturge portrayed Poland as a market
which is mushrooming in Warsaw and in other
major regional centres. Vacancies run in the low
single digit percentages with new stock coming
on stream. "There is still a long way to go
to market max. It is essential new stock comes
on stream quickly as a key pillar in the FDI offering,"
said Dorota Ejsmont from King Sturge.
Moving forward, opportunities will exist in the
deeper regional markets – this will comprise
both new-build and regeneration opportunities.
Innovative market fi nancing mechanisms
are eagerly awaited as a market driver.

Retail continues to be a buoyant with the
sector benefi ting from the current economic
boom. Attention has focused on forward
opportunities in off-city centre locations and
also regeneration, where there is huge scope
around city centre and railway stations.
Site location, footfall, planning and creative
fi nancing are critical success factors.

UEFA EURO is a catalyst for growth. It sets a
deadline for transport and hotel infrastructure.
Are there opportunities for retail and offi ces
around 2012 delivery plans? Experience
shows that non football revenue streams are
vital for the sustainability of stadiums. Poland's
expanded infrastructure network will create
new business opportunity in the regions
opening up new offi ce and commercial real
estate markets, said Marta Wilk of PL.2012.