“Prices are still in turmoil.” Where is the Polish Real Estate Market Heading and How to Make Money On It

“Since 2020, the Polish real estate market has changed so dramatically that the events of 3–5 years ago seem like a completely different reality,” notes Galina Kharlamova, CEO of the Varem Estate real estate agency. In this interview, Galina told us about the unexpected consequences of state credit programs, explained why developers can afford not to reduce prices even in a frozen market, and shared strategies that will help preserve and increase capital in the Polish real estate market.

Market Condition and Consequences of the Credit Program “Bezpieczny kredyt 2%”

— Galina, how can you characterize the current state of the Polish real estate market?

— The real estate market of any country is a living organism that changes depending on external and internal factors. Since 2020, the real estate market in Poland has changed so much that the events that took place here literally 3–5 years ago seem like some other reality. And being at the epicenter of these events and changes is especially interesting.

In 2023, after the introduction of the Bezpieczny kredyt 2% credit program, the cost of a square meter throughout Poland increased by 15 to 30% in just one year. In Warsaw, housing prices in some areas increased by 35%. Of course, experts predicted an increase in demand and an increase in prices, but no one expected it to be like this.

This credit program closed quite quickly — literally six months after its introduction (although it was designed for 5 years), but its consequences are still felt on the market: prices are still in turmoil. Only by mid-2024 were all the preferential loans issued under this program. And it seemed that now the market would calm down and return to its stable state when the growth in the cost of a square meter was approximately 5–10% per year — and it is with such price dynamics that both buyers and sellers equally understand the profitability of transactions.

However, the government in the event of upcoming elections, announced a new credit program for purchasing housing in Poland, similar to the previously existing Mieszkanie dla młodych program. However, the conditions, as well as the timing of the introduction of this program, were very vague. And the market, of course, reacted very sensitively to such news — buyers “froze,” expecting that they would be able to use state assistance again, and some sellers removed their ads, hoping that they would be able to sell their property for more.

After the super-rapid growth and incredible activity in 2023 and early 2024, we saw a sharp slowdown in the market that lasted for about six months. And, of course, it is during such fluctuations (if you choose the right moment) that you can very profitably invest in real estate — which is what my clients did. But I will tell you about investments and investment strategy options a little later.

— What caused this market slowdown?

— By the end of 2024, the prices of offers and real transactions in some parts of Warsaw differed by 10–15%. This means that sellers did not want to lower prices, but in the end, when a real buyer came to them and bargained, the final price of the transaction was significantly lower than the proposed one.

The market very abruptly changed from a “seller’s market” to a “buyer’s market.” It was the buyers who began to dictate their terms more confidently, and the sellers who were more willing to agree to them. This trend was characteristic of both the primary and secondary markets. And if on the secondary market sellers could only bargain over price, then on the primary market developers, in addition to lowering prices, began to offer various payment installment plans again: 10/90, 20/80, and 30/70.

The essence of such installments was to pay 10% or 20% of the cost of the property when concluding a preliminary agreement with the developer and pay the remaining 90% or 80% after the completion of construction. In this case, the developer builds the house actually with his own funds (or using a loan), and the buyer does not pay for his loan until the moment the house is completed. If you also need to rent an apartment, then such an installment is really very profitable. 

At the same time — which is also important — with such installments, the buyer acquires real estate that will be built in 2026-2027 at prices of the end of 2024. With such installment payments, developers have fueled demand for themselves, thereby leaving prices at the same level. No less interesting is the fact that developers, unlike sellers on the secondary market, can remove some ads from the sale, artificially creating a shortage of real estate. Given the profit they received in 2023-2024 (which is about +25-30% compared to 2021–2022), they can afford it. And as a result, real estate prices on the secondary market have already adjusted by 1-3%, and on the primary market (according to official statistics of offers) they continue to grow or remain at the same level.

New Credit Program “Pierwsze kluczy” — What Will Be the Result?

— Not long ago, a new credit program, Pierwsze kluczy, was announced. Do you think this program will affect the market to the same extent as Bezpieczny kredyt?

— I don’t think that the Pierwsze kluczy credit program will affect the market to the same extent as the previous program, but it won’t go unnoticed either. The thing is that the program currently has many restrictions for participation and quite significant ones. The program itself provides subsidies for mortgage loans and support for purchasing real estate on the secondary market or building a house. That is, you can’t buy housing on the primary market with this loan. Moreover, real estate on the secondary market must have been built at least 5 years ago.

But the most important restriction is the price limit per square metre. The idea is to prevent speculation and uncontrolled growth of real estate prices by introducing maximum prices per square metre of purchased housing. For most localities, the price per square metre should not exceed PLN 10,000, and in Warsaw, PLN 11,000. At the same time, city authorities may decide to increase this limit by an additional PLN 1000/m² at their own expense, but the sources of funding for such additional payments have not yet been determined.

That is, the maximum cost per square meter in Warsaw for participation in this program can be 12,000 PLN, and this is with the average cost per square meter of housing in Warsaw being over 17,000 PLN. That is, in Warsaw and large cities, it will be practically impossible to use this loan.

On the other hand, for small towns, it is quite possible to fit into the 10,000 PLN limit — especially where the average price per square meter is currently 7000–8000 PLN. And I think we will come to the point where the average cost per square meter will increase in these small towns — sellers will simply “adjust” the price of housing closer to those same 10,000 PLN per square meter. And do you know what will happen when the cost of real estate in small towns increases? That’s right — prices will also increase in large cities in Poland.

— So there is no option that housing prices will fall?

— I don’t have a magic ball that would show what will happen to real estate prices. But I don’t see any global prerequisites for a significant price reduction. On the other hand, in terms of the amounts of real transactions, we are now seeing a small adjustment in the cost of a square meter, and this gives hope for market stabilization.

Strategies for Investing in Polish Real Estate

— We touched on the topic of real estate investments. Galina, tell us, is it profitable to invest in the Polish real estate market now? And if so, what strategy should you choose? 

— Investments in real estate are the safest and most understandable instrument for preserving and increasing capital. The Polish real estate market has always been interesting from this point of view, and especially in the last five years. High market volatility, of course, provides for slightly higher risks, but when working with professionals, they do not provide for capital loss. Here, we are talking about the fact that an investor can earn both 15-20% per annum and 4% per annum. As for investment strategies, there are not many of them in general.

The first strategy is buying real estate in Poland on the foundation pit and its resale is more expensive after the building is put into operation. In this case, the apartment can be sold both in the condition from the developer and with repairs — here, again, it is necessary to clearly calculate in which cases it will be profitable and in which — not. T

The second strategy is to buy an apartment for long-term or short-term rent. Here, the profitability of real estate after deducting all expenses reaches 5-6%. And I would like to emphasize that I am talking specifically about profitability after deducting all expenses. Because I often come across promises of 10-15% annual income from renting out an apartment, but few people include in their expenses the services of a notary during the transaction, payment of the mandatory tax on renting out, property tax, payment for repairs in the apartment, etc. It is easy to promise 15% per annum, but it is simply impossible to get it in reality. 

The third investment strategy is the so-called flipping, when a “killed” apartment is bought, repairs are made there and then the housing ready for occupancy is sold. But for this method of investment, you need to be in Warsaw or have a trusted person here who will be engaged in the repair of such real estate. By the way, we have repair teams that do turnkey repairs for our clients, sometimes even without the presence of clients. 

The fourth strategy is buying real estate on the primary market using 10/90 and 20/80 installment programs for the purpose of reselling such an object by assignment of rights. That is, in this case, the investor does not pay the remaining 90% or 80% but resells his rights to purchase this apartment to another person. Given the constant rise in prices, this method of investing was very profitable, but not long ago a law was passed allowing resale by assignment only once every 3 years. Thus, now this investment strategy, if available, is only available once.

I constantly monitor market trends and changes and analyze external and internal economic factors, and I have one conclusion: with proper calculation, the right choice of investment, and investment strategy, income is guaranteed. I thoroughly understand this issue not only for my clients but also for myself, continuing to invest in real estate in Warsaw.