i was disappointed to see 33 gunnery lofts (gliwice) apartments for sale to UK investors through findaproperty.com. the prices quoted started at 306,566 zl, i.e. about the same psm price as PS sold them last august with the promise of '30% expected capital gain in the next 12 months', once PS's finders fee was accounted for. the same images were used as in PS's sales document, though the development's name had been changed to (a friendlier sounding?) granary lofts.

this raises a few issues:
- if other UK investment groups are involved in this way, resale and rental prices will be hit.
- the apartments on findaproperty had a wider range of sizes available than PS had offered, e.g. from 40m.
- has PS done any thinking about why the 'expected' capital growth has not occurred? and how they might ensure that future forecasts are more accurate?

nb the flats were on sale via a company called churchill. the only person i managed to speak to there said he thought they might have dropped the offer, possibly because they weren't selling.

any PS response most welcome.

regards,
dan
(a gunnery lofts investor)

Hi Dan

I cannot yet comment on the 33 Gunnery Lofts that are currently for sale on Findaproperty. The developers website has just 10 units left for sale in this development but we will look into this.

You are correct to point out that prices in Gunnery Lofts have not moved since we offered this deal. We secured a 7% discount from the developers list price at the time which was PLN 7,000 and it remains at this price.

In terms of the 30% expected capital gain - this was never promised by Property Secrets but was expected.

Yes, we have done a lot of thinking why the "expected" capital growth has not occured. We go to great lengths when making predictions of how a market will perform. We look at economic performance, demographics, wages and salaries, investment into the area amongst a lot of other things and apply these to each market we are operating in. These are predictions at the end of the day and at the mercy of downturns in the market like we saw in Poland.

The market slowdown we have seen in Poland since then has almost certainly had an effect on the Gliwice market. We must however point out that our second deal in Gliwice has achieved 22% growth and the Katowice market (Gliwice is situated in the Katowice conglomeration) achieved the highest growth in Poland in 2007. According to rednet consulting, capital growth in Lodz and Katowice was 40% which was the best performance in the market last year.

Why did Gunnery Lofts not achieve the same growth as Silesia Apartments?

This development is aimed at a different market. Gunnery Lofts is situated in one of the best locations in the city, is an astounding development completed to a very nice finish and will appeal to the middle to upper class market. Wages in Gliwice are second only to that of Warsaw and we believe the market is there for more luxurious developments such as Gunnery Lofts - it just hasn't emerged yet.

The development completes in July 2008 but I personally don't believe the market will have moved significantly up until then - I do believe the potential for capital growth exists but this is a long term investment. Ultimately, the location is one of the best in the city, this is the first development of this type in the city and the quality of build is excellent. The economic fundamentals in the city remain the same.

In relation to the range of sizes we offered, we had a choice of any unit in the development but chose these one and two bed units as these were located in the best position of the development and we believe will offer the best rental potential.

I hope this helps Dan

Noreen

thanks for your prompt reply, noreen.

i do appreciate that we cannot ask for 20/20 foresight, and i generally have a good opinion of PS's analysis. but it would be helpful to know whether the over-optimism while selling polish developments was due to the supply side: e.g. not registering how much else was being built? or the demand side: e.g. not appreciating the effects of the government's high interest rate policy? or some other factor. working out the answer to this would help improve future forecasts.

anything you're able to find out about the new gunnery loft apartments being sold to UK investors will obviously also be of interest.

regards,
dan

Hi Dan

Like you my overall view of PS is positive but I think the forum is the place to keep them grounded and some contructive criticism doesn't go amiss. So here goes!

I have the sense there is more effort on marketing and sales these days - no coincidence that there's a huge amount on Slovakia after months of quiet just when a new deal is launched. Same today with Bulgaria. I do think some of the estimates of growth are over egged but so far the markets in general have been growing fast so it's worked. The next year or so will be interesting in terms of forecasts. I don't think the credit crunch can be blamed for any under-performance (yet) and credit to Noreen for not making that excuse here.

Similarly with the costs and difficulties of doing business in these countries. No-one could expect PS to say finding a mortgage would be impossible and you'd spend a fortune on legals and notaries but a little more realism wouldn't have gone amiss (and still wouldn't)!

I don't know anything about this particular investment so these are just general comments but your views on growth predictions sparked me off. I guess it's probably the "Santa Marina blues"!

Huw