Size isn't, as they say, everything, but Poland really does stand out among the accession countries simply because it dwarfs them in just about every aspect – population, geographical size, and, some would argue, long-term investment potential.

In terms of attracting foreign investment it is again the undisputed leader of the pack - having already attracted an estimated 62 billion dollars.

Ober-Haus, the real estate company, which specialises in Poland, among other markets, describes the effects of Euro entry on property prices as 'EU-phoria'.

Truly impressive growth rate

The former Communist country chalked up a truly impressive rate of growth during the later part of the 1990s but it was hit harder than other accession countries by the economic slowdown of the last few years.

However, GDP growth was an impressive 3.6 per cent in 2003 and a big rise to 4.5 per cent is predicted for 2004. Inflation is down – to 0.8 per cent last year. Interest rates are at record lows and corporate taxes have been slashed by the government – as it promised - to encourage inward investment.

Unemployment, for long a big problem, lingers, but is now down to 6.5 per cent, in Warsaw at least.

Last year, according to Ober-Haus, prices for residential property in the capital rose by more than 25 per cent to a city-wide average 872 euros per square metre.

Despite the rapid price inflation, few see evidence of a price bubble developing. Ober-Haus, for example, predicts prices for the six-month spring-to-summer period to show average gains of around 5 per cent.

Interestingly, a phenomenon predicted in East European Property Secrets (www.east-european-property-secrets.co.uk) is also recorded by Ober-Haus.

“Prices of smaller apartments now rise much faster than the prices of the big, luxurious apartments closer to the centre,” reports the company.

This is a trend we will see over and over in these Eastern European countries.

The original investment market – high-end, luxury apartments suitable for rental to expats – is being replaced by properties suitable for the emergent middle class within the countries themselves.

Dominated, initially, by Warsaw

The Polish investment market is still dominated by Warsaw, although other centres, such as Krakow, are becoming more interesting to buyers.

And in Warsaw city centre, Ober-haus reports, new apartments are selling for an average of 1,300 euros per sqm, with the most prestigious flats, such as Dom Development's – luxury flats on Niecala Street in Saski Park, selling for 2,900 euros per sqm.

Outside the centre, here are some average prices for new apartments in the smartest areas – Wilanow, 1,100 euros per sqm; Mokotow, 960 euros per sqm; central Zoliborz, 960 euros per sqm; Ursynow, 720 euros per sqm.

New apartments in Poland are sold, as they are in many other Eastern Eight countries including the Czech Republic, as ‘prime shell’, meaning they have no interior fittings whatsoever.

So, flooring, all bathroom fittings and kitchens, need to be budgeted for in the purchase price.

Ober-Haus estimates that further works to complete an apartment generally cost in the order of 150 euros per sqm.

The market in apartments has been hit in the last year or so by the general recession in Germany that has had a profound effect on neighbouring Poland.

The supply of new apartments fell by 37 per cent in 2003 from a record high of 16,000 in 2001.

Now, however, there are signs the market is picking up again.

The key areas in Warsaw for new build apartments remain Ursynow and Bialoleka. These are where 40 per cent of new builds are taking place and they are the fastest growing areas of the capital.

Two of the biggest developments are in Mokotow.

A joint venture by Dom Development and PKO Inwestycje is planned for 1,500 flats and 64 houses on a 22-hectare plot.

The first phase of the project is due for completion next year and all apartments from this phase are pre-sold at between 900 euros and 1,200 euros per sqm.

EKO Park SA is building a large development in Mokotow – a mix of residential apartments of between 32 and 190 sqm, and these are selling for between 850 euros and 1,150 euros per sqm.

Ober-Haus reports a steady stream of new build family homes. The number of building permits issued last year was 30% up on a year earlier and over 1,600 single family homes were built in Warsaw last year.

And the firm sees that figure rising to well over 2,000 this year.

GTC, Poland's leading developer, is building luxury family homes in swish Konstancin in the south of Warsaw. Houses there will be between 144 and 385 sqm and cost between 148,000 euros and 458,000 euros.

Foreigners are now freely able to buy property in Poland, although land requires a permit and can be a very time-consuming affair.

As far as tax is concerned – private investors declare rent received and pay at a rate that starts at 19 per cent and then rises in two other stages – to 30 per cent and 40 per cent.

However, mortgage interest and the normal costs associated with renting, as well as improvements can be deducted from tax.

Despite Poland’s undoubted economic problems of late – high unemployment and budget deficit, along with a painful transition ahead for many of the old, state-run industries in certain parts of the country, it offers fantastic long-term opportunity for the investor.

One aspect that is very appealing is the tiny size of the domestic mortgage market – and yet its phenomenal growth.

More than 2.1 billion euros of loans were granted in the country in 2003, an increase of almost 50 per cent on the previous year. This trend is likely to continue and accelerate, bringing ever greater demand to the property market.

Two facts about Poland illustrate its long-term attractiveness to investors vividly:

• Outstanding mortgage loans total less than 2% of the country’s GDP, a tiny amount when compared with the EU average of 48 per cent.
• The average monthly wage in Poland is 578 euros.  The EU average is 2,335 euros.

The growth potential, therefore, is enormous.