The Future of the Polish Property Market
This is a preview to the chapter The Future of the Polish Property Market from the book Buying Property in Poland by Tim Hill.
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The answer, as with all real estate markets across the globe, is confidence. Every piece of land or building has a value made of two parts, its rebuild cost and confidence in its location.
This means it is only necessary to know if confidence in Poland is likely to grow over the coming years. The more confidence there is in an area, the more companies will invest in business and private individuals will invest in their own lives. The more this occurs, the more demand there will be for property and thus the higher its price will rise when supply is insufficient.
The indications for Poland are numerous and strong as the country has a strong imbalance in its Gross Domestic Product versus Germany and it is set to benefit from further foreign investment, freight and logistics growth, a rising tourist trade, further confidence in the use of mortgages and the introduction of the euro. Furthermore as covered in the previous chapter it is clear that the supply of new housing will be restricted for some time to come.
A Growing Gross Domestic Product
When Poland achieved full independence in 1989 its Gross Domestic Product per Capita was a fraction of its German neighbour. It was obvious that two countries sitting next to each other with similar political systems and resources could not maintain this disparity. Either Germany would have to go into recession or Poland was going to start growing.
It was the latter that was most likely and the latter that happened. Increases have been dramatic, in 2002 GDP was one quarter of its German neighbour, today it is nearly 50%1 growing at 18% between 2005 and 2006. For reasons explained later in this chapter all the indicators suggest it will continue to rise over the next decade until it reaches a closer balance with Western European countries.
Beyond this there are optimists who believe it may actually overtake countries like France. If a messy and heavy taxation system and the extreme bureaucracy that surrounds Polish businesses are resolved, anything is possible in the long term.
Foreign Direct Investment
Foreign direct investment (FDI) is the money coming into a country for the purpose of creating a return. This might be a foreign company purchasing a warehouse to lease or a company such as LG setting up a factory.
FDI comes in two forms, actual FDI, which shows a historical pattern and the FDI Confidence Index (created by AT Kearney) which looks at how likely future investments will be.
On the former Poland has performed extraordinarily well with large inflows — 13 billion dollars in 2004, 10.5 billion in 2005 and nearly 14.9 billion in 2006 (when it overtook Germany). High unemployment, low salaries, cheap land, an educated workforce and numerous tax incentives have all played their part in attracting FDI.
Countries like Poland have offered companies a viable and geographically more desirable alternative to the likes of China and India where delivery is slow and the return of faulty goods awkward. Interestingly there are some early signs that Chinese and Indian companies are looking to set up service and logistics centres in Poland for exactly this reason. Either way the country wins.
The FDI Confidence Index gives guidance for the future and Poland has been very consistent in its performance. The Index is a listing of countries in order of their likelihood to receive foreign investment over the coming 12 months and is based on surveys of the major global companies. The most promising country is ranked as number one and Poland has been in the top 20 for the last three years.
Freight and Logistics Growth
In the middle ages Poland made its fortune by being in the right place to benefit from the busy trading routes between east and west as well as north to south. Once again it looks as if history will repeat itself.
The country quite literally sits on a European crossroads. Sea freight comes in from Scandinavia and the globe via the ports of the north where Gdansk is the only major Baltic sea port to offer year round ice free access to some 300 million central European consumers. Road and Rail freight criss-crosses the country on its way from east to west and back again.
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What else is in the chapter 'The Future of the Polish Property Market'?
Production and Exports
Poland has gone a long way to turning round the inefficiencies in many of its factories, making the country’s products desirable in foreign markets. Unprecedented growth in exports since the ...
Poland has a huge potential in the leisure market, often limited more by the lack of hotels than demand. The PMR research group found the country has fewer hotel bed ...
Confidence in Mortgages
Despite exceptional price rises, most Poles buy for cash. Often they choose to live with parents longer, even after marriage, to achieve this. ...
Introduction of the Euro
Many countries that have already joined the Euro Zone bemoan one of its negative effects; it causes property prices to rise. ...
Poland Versus Other Central European Countries
Although there is much in Poland’s future that is positive any investor needs to consider not only if the country is a good place to put their money, but more ...
Looking at the future of the Polish property market, growth in demand seems the most viable scenario. The reasons are numerous: the population is getting wealthier at a rapid rate; ...