The real estate market in Poland, according to our interlocutors, is a «dark horse» in the world of investment, and now is the best time to buy real estate in this country. Why precisely now? Will prices for apartments in Warsaw fall in six months? And what does a «dark horse» mean — is Poland really not in vogue among buyers now? One of Realting.com’s journalists asked the trickiest questions to two market experts — Alex Kuhl, General Director of the Bauwille Polska real estate agency, and Galina Kharlamova, a specialist at Bauwille Polska. The answers to these and other questions are in this interview.

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Our Experts:
Galina Kharlamova, Bauwille Polska Sp. z o. o.Alex Kühl, CEO of Bauwille Polska
Sp. z o. o. founder of Antimakler Investor Club

«Buyers are still running after developers to buy really nice apartments»

— Tell us about the state of affairs in the real estate market in Poland. Is it possible to predict the tendencies of the year now? In 2022, will prices continue to grow, or is it still worth expecting a decrease in the cost of a square meter?

— The cost of housing in Poland is growing, and this trend has remained unchanged since the republic’s exit from the 2008 crisis. Recently, the rate of growth in the cost of a square meter is impressive: approximately + 10-15% per year (depending on the area, footage, and number of rooms, this figure can reach + 20%). And despite this, Poland has almost the lowest prices per square meter of housing compared to other European countries. There is even an opinion that until Warsaw catches up with Berlin in terms of the cost of a square meter, prices will not stop growing, — said Galina. — But in reality, of course, no one can tell for sure: in 2022, prices may rise by another 30% or fall by 20%. On the other hand, there are a number of external and internal factors that can help determine the overall market trends with a high degree of probability. 

The current situation in the real estate market in Poland in the language of professionals is called a «seller’s market». This means that now in Warsaw, buyers are literally lining up to buy really good apartments. In recent years, we have seen an acute shortage of housing in large cities of the country, because developers do not have time to meet the ever-growing demand. In my practice, there are many examples when, even at the stage of excavation and pre-sale (and sometimes even before obtaining a building permit), all one- and two-room apartments are sold literally in 2 weeks. What can we say about apartments with the best layouts — they «fly away» faster than hot cakes. 

At the same time, I want to emphasize that we are talking about the purchase of housing not only by foreigners, but also by active players in the local market. The fact is that now the interest rate on deposits is extremely low, and Poles prefer to invest their savings in real estate (the annual income of which significantly exceeds the interest rates on deposits). In addition, pensions in Poland are not as high as many would like. And people are trying to earn money for a comfortable future. That is why real estate has long been a part of the business: buying housing on a foundation pit and then reselling it at a higher price, or renting out apartments and receiving passive income. 

— The «shortage» of housing in the Polish market is now about 3.5 million apartments. And developers are quite actively trying to satisfy this demand, but at the moment it is simply impossible to do so. It is this figure that allows us to say that in the near future the cost of a square meter of real estate in this country will only grow, and the «seller’s market» will only strengthen, — says Alex. — In Germany, I observed approximately the same processes about 5-6 years ago, and this trend continues there. «Buyers are still running after developers to buy really nice apartments»

In addition, there are not so many tools on the investment market that are available to everyone, and, most importantly, safe. Unlike trading or stocks, real estate is understood by everyone. You don’t have to be an expert to understand that you can make money from renting and reselling real estate. Plus, owning it in some situations gives tax breaks that affect your final income.

«Profitability from buying real estate for rent in Europe is declining, while in Poland it is growing»

Why is the Polish real estate market considered more interesting in terms of investment than, for example, the German market? 

— In recent years, the cost of housing in Europe has been growing. The rent is the same, but much slower. As a result, the yield from the purchase of real estate for rent decreases. Today in Germany, the percentage of such income reaches a maximum of 3%, while Warsaw «gives» you from 4-5% up (in other cities of Poland it happens even more), — Alex explained. — Do not forget about the strong overregulation of the entire process of renting real estate in other European countries compared to Poland. For example, in Germany, the tenant is actually the king, who it is almost impossible to evict. According to local law, if the owner of an apartment wants to terminate the lease, there can be only one reason: the landlord or his next of kin are going to live in this apartment themselves. That’s it, there can be no other reasons. In any other case, when trying to evict a tenant, the tenant will file a lawsuit in court — and win it, because all lease agreements in Germany are indefinite. 

It is also worth mentioning here that in many large cities of the country a ban on renting apartments by the day has been introduced (a fine of 50,000 euros) and there are attempts to establish the so-called «rent cap» — the maximum amount of rental rates. 

In Poland, the situation looks different. Now this is an ideal platform for investing in real estate due to the fact that many processes are still being set up here, prices have not reached the «European» level, and the level of service is quite high. We have already talked about the situation on the market above, but it should be understood that all these data are more related to large cities in Poland. The regions are not yet that developed and cannot compete with other European cities, but Warsaw, in my opinion, has almost caught up with Berlin in terms of investment prospects. It’s just a matter of time.

You can watch a detailed video about all the advantages and disadvantages of renting out real estate in Germany and Poland on Alex’s channel — Antimakler:

 — Some experts talk about the so-called «soap bubble», which is about to burst, and then apartment prices in many European countries will start to fall. What can you say about Poland?

— First of all, you need to determine what a «soap bubble» is and what kind of foundation it has, — Alex explained. — The basis for such phenomena is always the same — economic factors (both internal and external). The last biggest bubble happened in America in 2008, where unsecured loans were to blame. Almost anyone could get a mortgage, regardless of their income. As a result, people took out loans, bought real estate, demand increased and the cost per square meter also grew. As a result, many people were unable to repay these loans. Banks confiscated real estate from debtors and put it up for sale, thereby replenishing the market with many propertys. As a result, supply greatly exceeded demand and real estate prices fell sharply — there is was, a bursting «soap bubble».

In Poland and Germany (as well as in other European countries), obtaining a mortgage involves overcoming certain difficulties — such loans certainly cannot be called «easy». This means that people who are in the «risk zone» are less likely to be able to get these loans. 

The next evaluation criterion: lending rates, which always coexist with profitability. If they are high, then not everyone wants to get into credit bondage, as many like to call it. Many consumers, but not investors. And consumers have only one thing left to do: to rent an apartment. The rental market in Poland is now actively developing. At the moment, only about 20% of the total housing stock is rented out in Poland, 80% are buying apartments for living. In Germany, for example, this proportion is different — only 60% live in their own houses and apartments, and about 40% rent them. And I am sure that Poland will also come to this. 

I recently posted a post on my instagram @antimakler: «Only an idiot would invest in Polish real estate.» I often hear this phrase from skeptics and armchair critics. And in this post, I give a list of «idiots» who nevertheless invested in Poland in 2021.

This list includes the investment funds of Sweden, Denmark, and Germany, which «poured» from 100 million to 6 billion euros by buying apartments and commercial real estate in Poland. And most of these platforms will enter the rental market.

Why does this happen? There are 14 free economic zones in Poland. This means tax breaks, grants and subsidies. Many international companies are interested in opening their branches here precisely for these reasons. Over the past few years, companies such as eBay, Amazon, Booking, Google, and so on have placed their offices in Warsaw and Wroclaw. I simply cannot even list all the IT companies that have opened their offices in Poland — there are so many of them. Moreover, over the past 5 years, there has been a tendency for entire IT firms to move with their employees and their families from Minsk, Kyiv, and other large cities of the former CIS to Poland. 

Therefore, talking about a «soap bubble» in Poland, in my opinion, is unreasonable. This is just an attempt to play up sensationalism in the «yellow press» — nothing more. 

— That is, housing prices in Poland will definitely not fall this year?

— I know investors who have been waiting since 2014 for prices to fall. They are still hoping to buy real estate in a «falling market» and are literally «sitting» on their money, — said Galina. — But the fact is that one way or another, money is getting cheaper, and apartments in Poland continue to grow in price. If in 2018 for 100 thousand euro they could buy an apartment in the center of Warsaw, now for this price they have options only in some places on the outskirts of the capital. If we consider buying an apartment «for ourselves», then the most correct thing is to buy «here and now». Alex shows the economic justification for buying an apartment on a mortgage for himself using the example of German real estate on his Antimakler channel:

In fact, then, does no one knows when prices will start to decline and whether they will decline at all? The real estate market is a living organism that subtly reacts to any external and internal factors. The cost of a square meter is affected not only by credit rates but also, for example, by lowering VAT on electricity and changing the cost of gasoline. Are people stopped by the increase in mortgage lending rates in Poland? No. Demand for real estate is still great, but more and more of it comes from investors.

You need to understand a simple truth: as long as the amount of rent covers the mortgage payment, investing in real estate is profitable.

«In order to buy an apartment in Poland, a realtor is not needed», or why do you need to contact market specialists?

— Are there any peculiarities in the legislation when foreigners buy real estate in Poland?

— For foreigners to purchase real estate in Poland, just holding a foreign passport is enough, — said Galina. — At the same time, it must be remembered that a husband and wife always acquire real estate in common joint ownership. That is, the spouse cannot just come and buy real estate for both — it is necessary to have a power of attorney or notarized consent of the spouse to purchase property. The main nuance that you need to keep in mind is that this rule applies to an apartment (that is, residential real estate).

An apartment in Poland is considered a residential area of 25 sq.m. All premises with a smaller area are considered commercial premises. That is, an apartment of 19 sq.m. will be considered a hotel-type apartment. For the acquisition of commercial premises by a foreigner, or of a house or a house on a land plot, as well as just a land plot, they must obtain permission from the Ministry of Internal Affairs of Poland. To do this, the Ministry of Internal Affairs will check whether the buyer has a connection with Poland and whether such an acquisition contradicts the country’s strategic interests. That is, a foreigner who, for example, permanently lives in Minsk, will not be able to obtain such a permit. 

But what does «a connection with Poland» mean? Many buyers mistakenly believe that for this it is necessary to have Polish relatives or some other evidence that some distant, distant ancestors lived in the country once upon a time. In fact, to prove a connection with Poland, it is enough to live in the territory of the republic for at least 6 months, work here and pay taxes. 

As for loans, there is a very important point here: a foreigner who wants to take a loan to purchase real estate in Poland must work in Poland and receive a salary in zlotys. For citizens of the CIS countries (who do not live in Poland), such a loan cannot be obtained. If a foreigner has been receiving a salary in zlotys for at least 3 months and has a residence permit, then they only need to have 10% of the value of the purchased property — for the down payment — and the bank will most likely grant them a loan.

— Can a foreign buyer buy an apartment in Poland entirely on their own?

— In order to buy an apartment from a developer, a realtor, in essence, is not needed. The buyer comes in, the developer shows them something, explains the essentials, they go to the notary — and the deal is through, — Galina ensures. — However, it will take some time to find out what exactly this person bought. And the «X-hour» usually comes when the owner wants to rent or sell this property. And at this moment it turns out that, for example, along with the apartment, they also bought part of the road next to the house, and this is already commercial real estate, and they require a permit from the Ministry of Internal Affairs to work with it. How come? The fact is that under Polish law, the buyer of an apartment in an apartment building also acquires part of the land plot on which this house stands. IN THIS CASE A PERMIT FROM THE MIA IS NOT NEEDED. There are situations when the city obliges the developer to build a road to the building. And all buyers, together with the apartment, acquire part of the land and the road. And the road is already commercial real estate. And, whilst the Poles do not need any permits in the future, then foreigners need a special permit from the Ministry of Internal Affairs to purchase this piece of road. Not all sellers in the developer’s sales office are aware of this. Moreover, not even all notaries will check this thoroughly during the first visit when making a deal. But when you come to the notary for the second time to finally certify the transaction and formalize the ownership, it turns out that you initially did not have the rights to purchase this commercial property and the transaction cannot be certified. And then the search begins for specialists who can help obtain the necessary permit.

Therefore, to answer your question, I can say this: in order to buy an apartment in Poland, a realtor is not needed. But in order to arrange everything correctly, you need a specialist who has been working in the market for many years and knows about all the nuances of any real estate transaction. And this applies not only to legal aspects. A truly experienced professional knows where the windows in an apartment should go, what footage of real estate in Poland is the most popular among tenants, and why apartments in the same building on different floors can cost differently — both when buying and when renting rent.

— It is also important to understand the purpose for which a person acquires this property: for themselves or for investment, — Alex added. — If the apartment is bought for their own use, then they will be more likely to buy what they need. Because the criteria here are quite subjective: I like the layout of the apartment, the view from the window is good and the commute to work is convenient. In investments, it is important for the buyer to have good liquidity, receive a high income, and, most importantly, to know how real estate prices will rise in a particular city. This requires an analysis of the situation, the micro- and macrostructure of the market at the moment and in the future. Purely theoretically, you can collect this data yourself, but it will be much more productive to turn to professionals who work with this data every day. 

«You need to try hard to lose both money and an apartment in Poland»

— In what situations can the buyer lose both money and real estate?

— In Poland, the buyer is protected from the complete loss of money, our legislation is very developed in terms of the security of acquiring real estate. When purchasing real estate in the primary market, the buyer never pays the developer directly — there are always trust accounts, known to many Russians as escrow accounts. When the money arrives in the trust account, the bank checks whether each stage of construction is completed and only then transfers the funds to the developer. 

Moreover, the recently adopted law has further tightened the requirements for the developer. The main innovation is the responsibility for information brochures when selling an property. That is to say, if the buyer sees a fountain and a small pond in the pictures near the house, then during the commissioning of the house, the yard area will look exactly like this. The same applies to all materials that will be used in construction. The buyer will know in advance what the windows, entrance doors and partitions in the apartment will be made of — no surprises. 

In Poland, there are no developers who are specifically dedicated to fool the buyers. Another thing is that there is a difference in the quality of construction. On the same street, houses can be built where there will be good heat and sound insulation, and there will be houses where neighbors will unwittingly know all the details of each other’s family life. And here it is important to understand exactly where you want to buy a home. 

— You need to try hard to lose both money and an apartment in Poland, — Alex ensures. — The main reason why a person can really lose money is forgoing reading the contract before signing it. For example, if the contract states that the money deposited during the reservation of the property is not returned in case of cancellation of the transaction, and a person suddenly changed his mind about buying this apartment a few days later, then, of course, the deposit will be lost. Therefore, the main thing I want to say is: read what you sign. 

— If at the construction stage the buyer suddenly wants to terminate the contract, then the developer will return all the money to the current account minus penalties (which, again, must have been clearly spelled out in the contract). But a competent buyer will not terminate the contract with the developer directly. Instead, they will try to resell the apartment. And in this case, not only will they not lose money, but they will still make a profit. 

In the secondary market, the buyer also needs to be very careful, especially for old houses that were built more than 20 years ago. Because you can buy an apartment on an unregulated plot of land. This will be revealed already at the time of the transaction, and there will be serious problems with obtaining a loan for the buyer. And, if you want to sell this apartment later, you will need to look for a cash-only buyer, which in itself can be more difficult. 

There are situations when real estate sellers contact me, and I understand that this property will take at least a year to sell (this is taking into account that the average period for selling an apartment in Poland is a month or two). Why? It’s simple. The apartment is located in a building without an elevator on the 4th floor, the windows face the north side, and the public transport stop is as far as possible. And you need to consider all of this immediately when buying an apartment. 

«Poland is now precisely the dark horse to bet on»

— Returning to the question of investment, can we summarize: why is it profitable to invest in real estate in Poland right now?

— The main nuance of today’s market is that the majority of investors are mass consumers who focus on trends, — Alex sums it up. — Such an investor thinks as follows: if everyone invests in Dubai this season, then I will buy in Dubai. Bulgaria was popular last season, and everyone rushed to buy there. Now Russian-speaking property owners in Bulgaria are trying unsuccessfully to resell it, the market is overflowing with offers, but demand has plummeted.

So one of the unspoken laws of a competent investor goes like this: do not invest where the crowd are investing. In this regard, Poland is now precisely the dark horse that you need to pay attention to. It is not promoted, and few people want to understand what prospects this country provides to its investors. I will just list a few points: 14 free economic zones, tax breaks, GDP growth in 2020 was 5% (for comparison, in Germany growth was only 2%), etc.

Another important point is the cost of buying real estate. On average in Europe, the tax on the purchase of real estate is 4-6% of the value of the property. Plus, the notary will take another 1% of the transaction amount during the execution of documents.

In Poland, the tax on the purchase of real estate in the primary market is 0%, in the secondary market — 2%. The cost of notary services is fixed — about 200-300 euros. Income tax in a Polish LLC is only 9%, while in the more advanced Germany it is almost 31%!

Taking everything into account, it is easy to draw your own conclusions about where it is more profitable to buy an apartment: in Poland or, for example, Germany. For me, the answer is obvious — I sold all my real estate in Germany and now I am building a new investment portfolio in Warsaw.