Warsaw’s long term property price prospects

Warsaw has been one of the world’s premier places to invest for several years now. During 2003, property prices in Poland actually fell, which provided a head start for investors. Poland’s European Union accession in 2004 lead to a large amount of government funding, a booming economy and an increase of industry to Warsaw, the country’s business and political hub, generating a large number of new jobs. More and more people migrated to Warsaw in search of these jobs, increasing population levels, reducing unemployment and creating an excess of disposable income.

The recent introduction of mortgages in Poland meant that locals could obtain 100% loan to value finance. This availability of cheap credit, combined with low property prices and an excess of disposable income, drove demand for property up in Poland and Warsaw in particular. The country was experiencing relatively slow supply due to an archaic planning system and the combination of this high demand and restricted supply, resulted in the perfect conditions for large and sustained increases in property prices. Today, prices have more than doubled in Warsaw since EU accession and growth has returned to normal levels, which leaves us wondering if the market has room to continue growing and whether it will remain one of the premier places to invest going forward.

Simon Tweddle, Chief Analyst at Property Secrets comments; “Although property in Warsaw is less affordable today than it was a year ago, I believe the fundamentals of the market are still strong and we will see long term sustained growth of 10-20% per annum over the next five to ten years.”

“The economy is still performing well and unemployment is falling. Mortgages have become slightly more expensive recently, but rates are still low and not high enough to put any serious brakes on the housing boom.”

Simon adds; “The 19 billion euros the government plans to spend, as a result of hosting the Euro 2012 football championships, will not only improve the country’s economic infrastructure and regenerate its cities, but will also put further strains on the cost of building materials and labour – again putting upward pressure on property prices.”

“The supply and demand dynamics of the market are out of balance (in our favour) and I believe we will continue to see good (approx 15% per annum on average), long term growth in the maturing Warsaw property market for very low risk.”

Some of the less popular areas of Warsaw are undergoing significant regeneration which is where the most capital growth is anticipated over the next few years. Wola, is not a particularly attractive area of Warsaw but low prices, massive infrastructure improvements and its proximity to the centre make it a great long term investment location. This can also be said of Praga on the other side of the river. Praga North is attracting lots of artists and is expected to be a very trendy place to live in the near future. In the short to medium term, the areas around the planned new metro line are where good growth levels are expected, such as Bemowo and Bielany, which are already showing very positive signs.

In conclusion, Simon adds; “Warsaw is a great long-term, low-risk bet. The fundamentals are still strong and the market is not likely to go away any time soon. The city centre is very expensive and growth is likely to be low relative to the rest of the city, although it would provide a good, low-risk, steady, long-term growth investment area. Some of the more outlying districts, which will benefit from new metro lines and roads, are likely to provide the highest growth rates medium to long term.”

“Warsaw still provides the property investor with a great mix of relative risk and relative reward. An investment in Warsaw, I believe, should be part of any serious Central and Eastern European property investor’s portfolio and is a buy now opportunity – before prices rise still further.”