Political Economy

Investing in Polish real estate

investing in Polish real estate
Empty apartments are all over Poland from over investment

I am an American living in Kraków, Poland. I am also a Polish citizen and an investor. My view of the Polish real estate market is this, if you want to buy a house to live in for the next ten years, that means owner-occupied, I think this is fine. But if you are speculating on investing in Polish real estate you will almost certainly lose money. All these photos are within a five-minute walk of my flat and this is not even all the empty buildings, there are, just a small sample. There are 1000s and 1000s  of apartments waiting for an investor or someone to take them off the builders and agents hands, in a short radius of my residence.

building in Krakow
This building they told me would be filled three years ago, it is still empty

Every day, I see a new investment being complete and my wife jokes good, I think they should build more, and sure enough, they do. This is nothing more than a speculative bubble that is in disequilibrium for the long-run. I know many people in Poland in Real Estate from builders to agents to a lawyer to investors and they all think the market is overbuilt and unrealistic.

Warning against investing in the Polish real estate market

  • Oversupply – There is a huge over-supply in the housing market. Foreign investors build on speculation and local people can not afford their asking price. I see scores of empty investments, new and old apartments empty, and they are empty for many years.
  • Weak Demand – Every person I know is building their own house in the suburbs. No one person I know is moving into new construction. The price per meter in a city is about 3-4,000 dollars a meter. In the suburb, you can build your own house for about 500 dollars a meter.  My sister-in-law finished a beautiful large house in the country for 300 dollars a meter.  So what person will pay 1000% more for a house that is not built to their design. Usually, some ugly block of flats that is some investors dream of making a profit with no care about design or the people who will live there.
  • Mortgages are hard to get – For normal people it is not possible to get credit since the crisis.
  • The population is decreasing or flat – Even a popular city like Kraków where I live, has a decrease in population every year, partially because of the birth rate but also emigration to warmer or high paid countries now that Poland is in the EU.
blocks of flats in Poland under construction
Construction everywhere because real estate operates on a lagging cycle economically.

If you just consider supply and demand and not even the tight credit market or long term demographics, the market is too high.

Polish investment housing
More investments then the market can handle in Poland

My friends in the Real Estate business have said they are selling nothing.

Polish house
One of the countless Polish houses waiting for an investor in Kraków

I have heard people putting money down on new construction and the builder goes bankrupt. I think the housing market in Poland is a mess.

empty lot in Poland
Empty lots for sale everywhere or new buildings going up only to remain vacant for the next five years

The good news about Polish real estate

Poles are hardworking sensible people. The country is getting rich.  With time income levels will rise. However, if the average income is 1000 dollars a month, this should be the average price of a house per meter.

Krakow apartments for sale
The whole city is for sale as people move to the suburbs and still more investing

Right now it is 300% this. Prices only really increased from 2005-2007.  To me, that is a speculative bubble. Before that is was about 500 dollars a meter instead of 3-4,000 dollars a meter. Some someday in the far future incomes will rise and prices will come down and there will be equilibrium in the market.

Poland construction
Poland is in the tail end of an over-investment construction cycle

Until that time, I would not walk but I would run from investing the Polish real estate market if you are considering buying. Me personally I will build my own house. It is cheaper and to my design. It will be my primary residence, not some speculative real estate investment in Poland.

real estate no owners
Many buildings are empty waiting for an owner.

Let me know when you think this market will recover, but some people say ten years.

Polish building for rent
Many buildings that can not sell are offered for rent but are still empty

I am someone that lives in Poland and know about the real estate market first hand. It is not a good investment.

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Mark Biernat

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Comments

5 responses to “Investing in Polish real estate”

  1. tom

    It is not cheap to build your own house in Poland, far from it actually, or do you know something I don’t know. Property prices are down 10% to25% and going down quickly, will be much cheaper to buy, I reckon.

    Reply
    1. Mark Biernat

      Living there for ten years the answer now is, it depends. If I would do it, I would build in the countryside. The people in my wife’s coutryside all know each other and one way or another you get it done cheap. There are few to none home in the Polish countryside I would buy and live in. They are either fully owned and used or run down to beyond repair.

      If you are a city slicker and need a house in downtown Krakow (do not recommend it) or Warsaw, that is a different story. There was a bubble and prices are drifting downward. However, Polish builders made their money and are sitting on assets rather then selling them too discounted. I would not buy a 50 meter flat in Krakow for anything more than 1000 pln a meter. It is about 6k a meter. I think realistically I would buy it for 500 pln a meter. So there you have it. That is what I think it is worth.

      Polish house in the countryside is all about material. The labor is not the cost. You need bricks or wood. But many people make bricks themselves or get the lumber themselves. It depends if you want a package deal or are active in the process.

      I no longer think Polish real estate is the best investment. I would not invest in it as it is cold and dark and it had its day in terms of hype. Now I would rather buy a place is warm sunny Florida by the ocean where people smile.

      Reply
  2. Luke

    Because of the very hight risk of a sudden escalation of the conflict in Ukraine I expect real estates prices in all adjacent Countries fall during the next year, Poland ahead, so that I prefer to be rather cautious.

    Reply
  3. john

    What do you think about Krakow’s current market?

    Reply
    1. Mark Biernat

      There are two ideas here. 1) Historic real estate, usually in the long-term always goes up. This is true of historic Boston, or London or Krakow. 2) Do we have a short term bubble created by ECB and FED expansion? Monetary stimulus is perpetuating this economic expansion. We know this.
      If you are buying something to live in then I would not worry too much, however, if it is for speculation, you have to look at valuation ratios of the unit and the area. It is a pretty competitive market so it is harder to find a bargain that you can flip in the short term. However, if you are really attuned to trends you can find this if you fixe it up. For value, as in cars I usually stay away from brand new apartments.

      Reply

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