The luxury residential real estate market in Poland has continued to grow steadily over the past few years. As Poles become more and more affluent, the prospects for this niche sector remain positive
By Adam Zdrodowski
Poland’s luxury residential property market has seen stable growth in recent years with the growing number of high net worth individuals in the country having led to an increase in the number and the aggregate value of transactions in the sector. Although the Polish market is much younger and relatively poorly developed in terms of its size when compared with some of the Western European and American peers, the expectations now are that it will continue to be on an upward trajectory in the near future.
According to the report, the annual number of agreements for the sale of luxury apartments amounts to 160-180, while the total value of the transactions is at the level of some PLN 440 million-PLN 460 million. In 2015 experts expected the annual number of deals to exceed 250 over the next few years. The completion of large projects and the finalization of package transactions can lead to major fluctuations in particular years. Kirejczyk pointed out that German investment manager Catella Real Estate alone acquired 72 luxury apartments in the Złota 44 building in 2016.
Poland’s luxury residential property market is still relatively young and is at an early development stage. Indeed, its beginnings can be traced back to the early 2000s, according to Arkadiusz Wojciechowski, managing director, business development, at Poland Sotheby’s International Realty. The market is also relatively small. “The luxury residential property market in New York’s Manhattan is ten times as big as the luxury residential property market in Poland,” Wojciechowski said.
Wojciechowski argued that there is actually no precise definition of luxury residential property. “What is regarded as luxurious in Poznań, for instance, may not be seen as such in Warsaw,” he said. It is the location, standard and transaction price that define an apartment as luxury property. Admittedly, the latter criterion can sometimes be misleading. Wojciechowski said there are undervalued properties in this sector, whose prices only rise after some time, for example when they are re-sold on the secondary market.
Besides, apart from luxury projects, single luxury apartments – usually very large, located on the top floor of the building and offering a commanding view of the area, can also be found in a number of premium residential schemes. Kirejczyk argued that quality rather than price is the most important feature defining luxury residential property. However, generally speaking, one can safely say that the prices of luxury apartments usually start from approximately PLN 15,000-PLN 16,000 per sqm.
In the opinion of Kirejczyk, the luxury residential product available in the Polish market is still relatively “modest” compared to the luxury properties found in some of the most prestigious and most expensive locations in the world, including London and New York. He pointed out that apartments sized slightly more than 100 sqm are the standard in the luxury sector in Poland, while those sized approximately 200 sqm and above are very rare. By contrast, in the more developed markets, 200-sqm apartments are quite common, he said.
Poland Sotheby’s International Realty data shows that the market is concentrated in five large cities and agglomerations with Warsaw, Wrocław, the Tri-City, Kraków and Poznań together accounting for 72 percent of all transactions. The Polish capital alone accounts for 50 percent of deals in the sector. In absolute numbers, this is not much. In Warsaw, where some 24,000 apartments were sold last year according to REAS data, the average annual luxury sales are at the level of between 200 and 300. Also, the annual supply of luxury homes in the city lies somewhere between these two figures.
In practice, this means that only a few (or just over ten in very good years) new luxury projects are launched in Warsaw annually. Neither the size of the Polish market nor the prices of luxury residential property in Poland are likely to grow significantly in the short-term perspective. The main reason for this is the fact that the biggest international capital is not present in Poland and the richest people in the world are not doing business in Warsaw. As this is not likely to change in the coming years, the market will rather grow in a stable way as Poles become more and more well-off.
Unstable supply is one of the teething troubles in the sector. Nevertheless, one can expect new schemes to hit the market in the near future. “A number of very interesting luxury projects located in the downtowns of the largest Polish cities are currently in the pipeline,” Wojciechowski said. In his opinion, buyers in this sector are now rediscovering central locations and there is a lot of demand for the best properties in urban centers. Some of the schemes there are not even advertised in the media, he noted.