What if any are the fundamentals to support Poland's talked of second phase of growth?

i.e.

Is wage growth increasing year on year at a rate higher than the capital growth?

Is the price to earnings ratio coming down year on year?

Are yields increasing to allow for future yield compression?

Or is it just a case of wishfull thinking that because the Czech Republic had a second phase of growth then Poland must do so at some point in the future.

Any hard evidence would be appreciated.

Hi,

There is an interesting article about the trickle of Poles going home, and this is likely to increase with the weakening £ and the growing Polish economy. And many are looking to purchase property when they return.

This may explain a possible future increase around supply and demand issues.

Regards,
Chris.

Poles in Britain trickle home, but most here to stay
http: / /uk .news .yahoo .com /afp /20080626 /tuk -britain -poland -immigration -a7ad41d .html

Hi Tom,

We believe that the 2nd phase of growth will happen in Poland like it did in Czech for the following reasons:

-wages are growing at good pace in Poland - 10% last year on average, higher than property price growth. It is expected they’ll keep the pace in the coming years due to the labour shortage. Of course, in some sectors the salary growth is much higher (worth to remember that Polish banks base an affordability on debt to revenue ratio rather than on income multiply formula)
-the FDI inflow is strong and more often goes into high-tech sectors creating well-paid jobs
-the economy is doing well, growing 5-6% per year
-mortgage finance is developing and Polish people becoming more educated in using it (refinancing). 100% LTV is widely available to locals
-the interest rates are on the rise, but it is expected the increases stop and from Q3 2008 we can even see some cuts
-the housing shortage is still there

However, property markets in major cities are going trough a process of stabilisation and consolidation. Number of transactions has dropped, but the demand is still there.

Price corrections have occured on the secondary market. It is worth to remember that secondary market is strictly correlated with the primary market as people sell panelaks and with little debt buy new builds. Price correction on sec market is good as it increases affordability of potential buyers of second hand properties.

Overvalued new apartments in bad locations are actually also falling in value. Good locations experience 0% or little growth.

The supply of new builds has increased significantly and the Polish market need some time to absorb the supply (6-8 months) – the same situation that Prague experienced between 2005 and 2006. After that we can expect the market goes back to normal – balanced supply and demand.

2nd phase of growth is strictly linked to the interest rates movements and if they start to decline (combined with the rising wages) we can see growing demand.

Currently, some Polish cities represents good buy due to the rental market, not the capital growth. The rents are on the rise and the demand for rental accommodation is strong.

Anna

Chris,

We’re putting together a piece on impact of Polish immigrants on property markets in Poland and in the UK, so watch the space.


Cheers,
Anna

Hi Anna

Very interesting post. Can I ask which Polish cities are currently presenting good rental opportunities? Thanks David

Hi David,

Currently, Warsaw and Wrocław are definitely the strongest rental markets in Poland. Wrocław represents great opportunity as property prices are around 30% lower than in Warsaw, while rents are only 10-15% cheaper.

Cheers,
Anna