Building on solid foundations

If you've got it, flaunt it - and nothing says bling bling like an international property portfolio. But if it's solid returns rather than a jaw-dropping seafront villa that gets your wallet itchy, you can do a lot worse than taking a trip to Warsaw. Just don't expect to go home a millionaire just yet

Despite the bias in property news towards the office and retail markets, many investors are operating on a much smaller scale, and would prefer to buy up several properties, which they will own and control outright, rather than entrusting their cash to a property development or investment fund. 

On the rise

And why not? House prices in Warsaw have been rising at a rate of knots in recent years. The average price per sqm in the city has increased by about 18 percent since January 2004, jumping from zł.3,892 per sqm at the beginning of 2004 to zł.4,600 at the end of 2005. Despite this, apartments are relatively cheap, by Western standards, and the smug joy to be garnered from showing your friends from London, Dublin or Paris around your palatial penthouse in Warsaw that you picked up for the price of a doghouse in a rundown alley in Brixton is sure hard to beat.

There are some things to note however. Many companies have bought up a lot of apartments and housing in Warsaw purely on the basis of capital appreciation. Much of it now sits empty, and this is particularly evident in more upmarket developments. At some stage, investors will release this stock onto the market, and it could have a very nasty effect on the price, with many funds setting 2009 as their selling-up date.

A mixed bag

Rents are also a problem. While some investors can afford to buy a property and let it sit vacant while they tot up the capital appreciation, others depend on the rent to keep themselves afloat. In Warsaw, rents tend to be a mixed bag and rental levels are actually more expensive than mortgage repayments, meaning many smart, young Polish professionals are simply buying their own homes rather than shelling out for rent. This is draining an already weak market of one of its most important sources of income.

The biggest mistake small investors often make is relying on the expat market. Expats in Warsaw are thin on the ground and many buy rather than rent. Expats do not even register as a market segment, so don't buy with the (almost non-existent) expat rental market in mind. 

That said, there is still a lot of money to be made in residential. If you are buying several properties, aim for around 55 sqm, and keep young families and couples in mind, because that is who you are selling or renting to. Don't forget about pesky service charges, agents are as credible here as anywhere else in Europe (think about it). Also, know what "Warsaw standard" is when pricing a property, and weigh up your currency options very carefully when it comes to mortgages. Happy hunting.