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Investing in the Polish property market - Demand outstrips supply

Investors have now turned their attention to what will be one of the most lucrative markets still awaiting development - the residential market in Greater Warsaw. With EU membership, and increasing economic confidence, investors are falling over themselves to get a foothold in the Warsaw residential market.

In 2004, GDP growth for the whole of Poland was 6% - but Colliers, in a recent report, has estimated that this was closer to 20% in the Greater Warsaw area. There is a very fierce competition to acquire land for investment, and much of this because only 14% of the land in Warsaw has been granted planning within the new master plan.

Poland suffers from a severe shortage of housing, which many experts put at almost 2 million units. The OECD recently calculated that there is a shortfall in housing supply of at least one million apartments, and that construction rates fall way behind national requirements.

Currently, just 2.3 new apartments are built per 1000 head of population. In Spain this figure is 13.8 per 1000, and in Ireland 14.1. According to the OECD, it will take 120 years to replace existing poor-quality apartments!

Poland Price - Projections in five years

Assumptions:

The Polish economy grows at a minimum average rate of 5% per annum; Warsaw's economy grows substantially higher, and middle class incomes grow accordingly

Average apartment prices continue to grow at a minimum of 10% per annum

Warsaw's population more than doubles to over 4 million by 2010

Commuting becomes more acceptable to the average Pole

Mortgages continue to be widely available and offered with highly competitive interest rates

Poles view mortgages as an acceptable way of purchasing homes. After the falloff communism, hyperinflation persisted for two years, and many people lost their savings. There is therefore an innate fear of long-term mortgages, and borrowing in general. This attitude is changing, and will continue to change. In the UK, residential mortgage loans are 63% of GDP. In Ireland they are 37% of GDP. In Poland, they are only 4% of GDP (and Poland's GDP is growing at more than twice the UK rate)

The affluent middle class continues to grow, and increased disposable incomes results in larger mortgages

Prices will rise proportionately higher if commuting times fall below the current 30-minute threshold. (It is assumed that this threshold will be longer within 5 years)