Diamond in the rough

Worldwide, investing in golf facilities falls within residential and hotel development and is one of the most dynamic and profitable sectors in property investment. In Poland, the market is in its infancy, mainly because golf is still not a mainstream recreational activity. Investors also face a number of handicaps, in the form of high real-estate taxes and a lack of financial subsidies Poland, with about 10,000 golf players, has 14 professional golf courses. Sweden offers about 600 courses and Germany has roughly 500. Market analysts say there is demand and space for at least 100 golf ranges in Poland, but by the end of this year only four new golf courses will be built. By comparison, Finland got 40 new courses last year. So why is it taking so long for one of the world's fastest developing sports to expand in Poland?

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According to the president of the Polish Golf Association, Piotr Mondalski, the main reasons are that people in Poland are not great sports fans in general, and they view golf as an expensive sport, practiced by the elite and the wealthy.

"It is said that up to 200 million people in the world play golf. They cannot all be aristocrats," says Mondalski, stressing that in Poland golf is played by many different people, including teachers, doctors, lawyers and businessmen. He calculates that the annual average cost of playing golf in Poland is roughly the price of a two-week skiing trip abroad. Retailers are also pushing golf into the mainstream, with equipment often on sale in supermarkets for a few hundred złoty.

An increase in the number of players must be met with a growth in course numbers, says Mondalski, but the latter is being stifled by a fiscal policy that treats investment in golf courses the same as a commercial investment. "The fiscal law in its current form does not perceive golf as sport or leisure," Mondalski says.

The problem is that if an investor decides to develop disused land, such as a dump, swamp or gravel pit, into a golf course and treat it as business activity, they are charged with a real-estate tax of zł.0.60 per sqm. "If you have a 100-hectare course, which is one million sqm, it makes zł.600,000," Mondalski says. The president of the Old Mazury Golf & Country Club, Andrzej Miękus, admits that the tax can constitute up to 20 percent of the annual maintenance costs of a course, which come in at zł.3-4 million.

A tough shot
Convincing those responsible for the legislation process to take a fresh look at golf is an uphill struggle for the sport's enthusiasts, especially as Poland has yet to yield a Tiger Woods or Jack Nicklaus. The fact that golf is not an Olympic sport also makes it unlikely to get any state subsidies. "In order to finance the training of young people from the national junior team we need more funds, which we get from sponsors," Mondalski adds.

According to Miękus, banks are also reluctant to provide financing for golf-course investments: "Golf is a novelty with a short tradition in Poland. It puts the banks off."

Handicaps aside, golf could yet prove a real money spinner. According to Miękus the sport's profitability comes not from the courses, but from the accompanying investments, such as residential and hotel developments surrounding golf courses. These investments, which are only starting in Poland, are one of the the fastest developing investments worldwide. "This is a standard in Portugal and Spain, which both have a relatively short golf tradition," says Mondalski. Golf has developed in those countries because houses were being built nearby the courses and then sold to foreigners, and Mondalski is confident that this trend can be replicated here.

Whether its playing for profit or pleasure, golf is a long-term investment. It is estimated that the investment costs in building a professional course, which vary from zł.15 to 25 million, return in eight to 12 years. Mondalski admits that at the moment the bulk of golf investors are already hooked on the little white ball and often have other businesses that allow them to run a course. But the potential of the market could yet drive other investors into the clubhouses.