Polish property bubble

Over the span of years 2002-2008 real estate prices in Poland have increased drastically. Between June 2006 and June 2007 alone, according to http://oferty.net/statystyki/062007.php, the average price of a square metre in Warsaw rose from 6683 PLN (1636 EUR) to 9540 PLN (2519 EUR) (over 50% rise in euro terms).

According to a major Polish newspaper, Gazeta Wyborcza:http://dom.gazeta.pl/nieruchomosci/1,73497,4333598.html?as=2&ias=4the average monthly salary in Warsaw buys 0.26 sq m, or in Kraków 0.22 sq m.

Same sources give rental profitability at 4% yearly: http://dom.gazeta.pl/nieruchomosci/1,73497,4333598.html?as=3&ias=4.This is lower than interest rates on bank deposits (5% in Polbank etc.).

In early 2007 the Polish property market began to show early signs of a property bubble;these included:

* banks increasing loan periods from 30 to 50 years to extend credit limits

* over 1 million families already in debt, and roughly 300,000 more going in debt every year

* increasing interest rates - analysts predict 6% by the end of 2007 (from less than 4% in 2006)

* number of new apartments for sale in Warsaw at one of the oldest Polish real estate portals: tabelaofert.pl increased from around 1750 in November 2006 to over 4300 in June 2007 to over 11000 in July 2008

* exotic companies declaring real estate development plans

* Polish economy showing signs of the overheating due to government incompetence: from 2005 to 2007 the forex deficit almost tripled (it had been decreasing in previous years); imports, which were decreasing (by 5%) in 2005, jumped to a 25% increase in 2007. Social unrest grows. Fact|date=September 2008

* stagnation of prices and dramatic drop of sales in a long period of time with dynamically increasing supply of residential properties

The arguments for further real estate prices rise or stabilization are:

* fast increase of salaries - around 8% per year

* low figures of both housing estate area and apartments per person, compared to other developed countries worldwide

* money repatriated by Poles who have emigrated

* rapid urbanization - the population of rural areas and small towns is declining rapidly, while the population of major urban areas is increasing quickly

* Warsaw has a population of only 2 millions – approximately 5% of the whole of the country – very low for a capital city

In the long term, property prices are unlikely to grow too high for demographic reasons:

* children of the 1980s demographic boom have finished their education

* it is estimated that over 2 million Poles have emigrated since Poland joined the EU in 2004

* fertility in Poland is among lowest in Europe - less than 1.3 children per woman at reproductive age

* only limited immigration into Poland is expected - Poland had no colonies, is not very rich, has long, cold winters and the Polish language is little used outside Poland and relatively hard to learn.

ee also

* Poland

* Bank of Poland