It's been a tumultuous few months in Poland, with flooding in Krakow and other parts of Southern Poland in May following the tragic death of the President and other high ranking officials in April's plane crash. This month, Poland will go to the polls early to decide on a new president, with Bronislaw Komorowski favored to win over Jaroslaw Kaczynski, twin brother of the deceased president. Recent public debt woes in Greece and other Southern European countries have negatively impacted the zloty, but analysts and government officials continue to paint a positive picture for Poland's economy and growth prospects.

During spring, we have seen a strong improvement in the sales market in Krakow. Prices are stable and not expected to move much higher in 2010, but the stand-off between buyers and sellers evident in the past two years has begun to fade. This means more transactions, and is positive for a return to health and growth for the local market. Buyers who have been on the sidelines for the past year or two are now beginning to actively look to do deals, and slowly owners with unrealistic price expectations are beginning to understand the reality of the market price. The thawing of the mortgage market is key to this process, and banks are increasingly willing to lend more and on better terms than during the last two years.

This year promises to be a key year for buyers as they can still take advantage of excess supply, particularly on the primary market where apartments in completed new developments can still be purchased, and often for lower negotiated prices. Such supply is diminishing quickly, meaning that buyers in future interested in the primary market will have to purchase off-plan and wait up to 12-18 months for new apartments. Very few new developments are coming on to the market in 2010, but many new (and mothballed projects) are now under construction for completion in 2011 and 2012.
Whilst things are definitely on the up when it comes to sales, the rental market in Krakow is going through a tough spell.  This is good news for potential tenants and not so good news for property owners. The market is characterized by excess supply and falling prices. The excess supply can be traced back to the end of the real estate boom in Poland, when many investors bought off-plan. These apartments have been slowly filtering on to the market in the past 12-18 months and are now having a dampening effect overall. New and high standard apartments are less affected than older and lower standard apartments on the market.  In general, there is still solid rental demand overall for competitively priced offers, but potential tenants are more sensitive to price because of the greater choice and supply available. Owners who are choosing to respond to the market are the ones who are getting their properties rented.

The Polish zloty has fallen around 10-15% against most major currencies in recent weeks due to the debt crisis in Greece and possible contagion fears. There has been no suggestion that Poland has any of its own debt worries, but investors have nevertheless sold off the Polish currency on fears of the region as a whole. We believe that such weakness in the Polish zloty presents a great opportunity for foreign investors considering purchasing in Poland.