Hi

We've previously talked about the huge boost the 2012 Euro championships will give to Poland's economy and the long term future of the housing market..

http: / /www .propertysecrets .net /article /they _think _its _all _over _but _how _much _will _euro _2012 _really _benefit _poland /1638 .html

http: / /www .propertysecrets .net /article /euro _fever _poland _celebrates _2012 _soccer _success _but _which _property _markets _will _be _the _real _winners /1601 .html

Now it seems we're seeing evidence of this in profit forecasts - notably in the construction industry.

PBG SA, Poland's biggest construction company by market value, expects profits to rise 40% in 2008 as it benefits from the country's construction boom, it has announced.

The western Poland-based company plans to increase net income to 142.6 million zloty from 101.8 million zloty in 2007, based on sales rising 40% percent to 1.92 billion zloty, it said.

PBG's Hydrobudowa Polska SA subsidiary expects net income to rise 34% to 53.6 million zloty. Sales may rise as much as 32% percent to 748.9 million zloty, boosted by preparations for the 2012 European soccer championships and inflows of EU funds.

Poland's second big wave of property price growth around the corner?

I think that second phase of growth is going to happen sooner than a lot of people think. I have no evidence for this, it's just a feeling I get from reading various websites on the Polish property market and Poland in general.

Six months? Possible, I feel. I think senitment is also becoming more positive towards Poland again.

The question really is where? Surely Warsaw and Krakow are too high - so Lodz and similar maybe?

The Polish economy is still performing well unlike the US and Europe and this year it is expected to grow by 5.5% down from 6.5% last year.

Will it be effected by the downturn in the US? Only about 2% of Poland’s exports go to the US.

What about subprime – will Polish banks be affected negatively? I read in the papers today that unlike the US, few Polish banks invested in exotic financial instruments and kept it simple by sticking to the business of deposit taking and granting loans. Thus Polish banks in the main did not invest in mortgage-backed securities. That’s good and Poland is not directly affected by the sub-prime crisis.

The country has a very small mortgage market as this is a newer market than the US or the UK – mortgage loan to GDP ratio is only about 10%. There are also few subprime borrowers with only about 4% of outstanding loans classified as problems with most borrowers being upper income urban professionals according to the FT.

Mortgage lending, although small in relation to GDP, has been increasing very rapidly however and last summer the value of loans overtook deposits for the first time. Poland’s banks reacted quickly with campaigns to attract deposits. In January, banks gained PLN 14bn in new deposits.

The fundamentals still look good for Poland – strong economy, wage growth, limited exposure to the credit crisis, deposits increasing limiting the need for inter bank lending.

Where the US crisis has hit Poland is the Polish stock exchange which has decreased in value in 25% since last summer but this is not in isolation to global markets

In terms of when we will see the second wave of growth, I don’t know, but agree that sentiment is becoming more positive towards Poland again. I suspect investor confidence will have to improve first but the upcoming 2012 and the level of investment going into the country to support this event could kickstart the market again sooner than some expect?

Noreen

Hi Ben

In relation to Lodz, I received an email this morning regarding a conference to be held in Lodz entitled the Integrated Revitalisation of Lodz.

The main topics under discussion are investments in the sector of revitalisation, conservation, culture and creative industries with work shops, talks etc.

This supports the previous posts that although the market has slowed there is still a huge amount of investment going into these markets, local initiatives such as the above are ongoing and like all property cycles, the market will enter a second phase of growth at some stage of the future.

Noreen

There's no doubt that Euro 2012 will give a huge boost to the Polish economy. In regard to that, cities which will be hosting tournament - Warsaw, Gdansk, Wroclaw and Poznan will benefit the most. In my opinion, those are the housing markets where we will see the second wave of strong property price growth.

There's also a bunch of medium and small towns that currently are experiencing property price growth caused by returning immigrants from the UK and Ireland, but in the long-term they will not offer good buy-to-let investment opportunities (no rental market).

Which city will be the first to enter the phase? My guess is that it would be Warsaw due to the very strong fundamentals and the fact the market is still relatively active in terms of number of transactions. I think that Wroclaw will perform strongly because of the huge amount of FDI the city is been attracting and following massive inward migration (great rental market).

I don't think Lodz has the potential to grow in the nearest future - wages here are at the lowest level among all main Polish cities and prices are high. Katowice is in more favourable situation - high wages combined with much lower prices.

Is the growth around the corner? I think Polish market will remain in the plateau phase at least till the end of the year.

The economic indicators are favourable and the economy has been in good shape, almost not affected by the credit crunch. However the main driver of the property market - locals- affordability is at the moment low due o the increasing interest rates.

The Central Bank of Poland has increased four times the base rate in 2008 to 5.75% and at least two more increases are expected this year. Additionally, borrowers are forced to take mortgage in PLN as they can get higher LTV than in CHF (the lowest interest rates).

Housing needs in Polish cities are huge due to the low quality of the existing stock and housing shortage and the market has a great potential for price growth. However the potential could be realised only if the affordability kicks off.

Polish market is now buyers' market and some great BMV investment opportunities could be found at the moment, especially on the secondary market.

Anna