Better safe than sorry

Although Warsaw, with flat prices growing at 20 percent annually, is still Poland's most attractive residential property market, some developers are beginning to expand into other cities, in case the Warsaw market should slow down. Ronson Development, which has so far sold about 1,000 dwellings in Warsaw, follows the trend. The company's president, Dror Kerem, does not share the general optimism of most Warsaw developers, and already fears market recession.

"Markets such as Poznań or Wrocław are not as attractive as Warsaw at the moment, but we have to think about the future. In two to three years their attractiveness will increase, while the attractiveness of the Warsaw market will decrease. It is said that the boom in the Polish market will last for many years. However, we can't forget that the market is influenced by both macro- and microeconomic factors, and the situation will differ depending on the city," says  Kerem.

Another of Kerem's strategies for defending against the possible weakening of the market is careful land selection and investment planning. He warns that companies which do not follow this rule will have to pay an exorbitant price for both land acquisition and construction costs. Kerem forecasts that in two years' time, the investments which are now under way will be finished and the market will finally turn to the buyers' side. A strong buyers' market will cause prices to grow more slowly, and therefore investors might have problems earning back their investment expenditures.

This goes especially for foreign investors, who, according to Kerem, do not understand the Polish market and only treat it as an opportunity to make quick money. "There is a danger that companies unable to retrieve invested money will try to cut costs wherever possible, for example, on the quality and precision of the finish," says Kerem.

Apart from Warsaw, Ronson has purchased land for residential development in Poznań, Wrocław and Gdańsk.