Property market in Poland

Poland’s property market is booming in a high demand environment which is not being matched by supply. A significant portion of the Polish population live in sub standard housing and it is estimated that Poland needs 2 million new homes. Only 74,000 new homes were built in 2004 (of which only 4,500 were built in Krakow).

It is easy to see why in terms of investment potential and the property market, comparisons are often made between the Poland of today and the Spain of around fifteen years ago. The countries have similar population sizes, land areas and comparable cities (Madrid = Warsaw; Barcelona = Krakow) and there are similarities in the cultures in that they are both heavily influenced by Catholicism.

An interesting measurement is to look at the populations of these comparable cities which show evidence that Polish cities are likely to grow. Currently Warsaw has a population of approximately 1.6 million people compared to Madrid’s 3 million and Krakow only 750,000 relative to the 2 million living in Barcelona. More significantly for Krakow, approximately 8 million people live within a 100 kilometre radius of the city, which is likely to put pressure on the city’s housing stock for the foreseeable future.

Similar to Poland today, the Spain of the past saw a larger portion of the population living in the countryside and people leaving home at a later age. The 1980s was an era of relatively high unemployment in Spain and people stayed in education longer resulting in a highly educated work force but low wages. This helped trigger Spain’s subsequent economic boom. Poland is experiencing similar conditions today.

Spain joined the EU back in 1986 and experienced a phenomenal property price boom throughout the nineties boosted by the injection of EU funds. Poland joined the EU in May 2004 and there is every indication to suggest a similar long term property boom is beginning to unfold.

In January 2006 Channel 4 TV programme, ‘A place in the Sun’ recently rated Poland as the “Number 2 destination in the top 20 European investment hot spots” predicting property price growth of 393% over the next 10 years and focusing primarily on Krakow. The programme, with 8 million viewers in the UK alone has generated a further flourish of foreign investor interest, which is likely to impact the property market over the next year.