Learning an Irish lesson
So can the Celtic property boom be replicated here?
Poland is 25 years behind Ireland, according to the managing director of Ober-Haus Real Estate, Peter Gage Morris. The situation in Poland now, just after its accession to the EU, resembles that of Ireland when it was knocking at the EU's door in 1973, i.e. it is "a poor backwater country, mostly agricultural," with "high unemployment" and dotted with "state-owned industries."
"Buying property was absolutely crazy" in Ireland 25 years ago, said Morris, but "now we all wish we had done it." Maybe this is why Irish investors make up a significant proportion of the foreign investors interested in Polish real estate, as they expect the situation to progress analogically to the Irish market.
In the last 25 years Ireland recorded 6.5 percent unleveraged annual growth, 14.8 percent annual growth to the 80-percent leveraged investor, and over 50 percent return on equity to the leveraged investor. The Polish real-estate market is already rocketing, and additionally the country has many things in common with Ireland at the start of its property boom.
As in Ireland many years ago, Poland has impressive prospective inward investment, reaching EUR 11.4 (zł.46.4) billion from structural funds alone in the next two years. Another factor is cheap labor, which is one of the main draws for foreign investment. This, in turn, is very likely to increase dramatically in the next seven years or so, as the examples of Ireland, Spain and Portugal show in their adventure with the EU.
The average wage in Poland is 21 percent of EU levels and, as experts predict, as it catches up with European rates a growth in property prices will follow. Also, relatively low taxes can attract investments, thereby boosting the property market. Although the 19 percent corporate income tax is not as low as in Ireland (from 10 to 12.5 percent), "it is low enough," stresses Morris. As was also the case in Ireland, the Polish currency, already stable, will gain an even stronger position after joining the eurozone in five years' time.
Foreign investors in real estate, among them many Irish, have already spotted the Polish property El Dorado. According to the Irish Embassy, every month a few Irishmen seek help to buy a flat in Warsaw. They are a nation fascinated by Polish real estate. On the one hand they feel safe on a market similar to theirs, and, on the other, opportunities on the Irish property market are running out. "One sqm [in Ireland] costs zł.30,000 to zł.40,000. This price is unlikely to grow further, that is why it is difficult to buy a flat and make a profit on it," says Bogumił Rutkowski from Knight Frank. On the contrary, in Poland prices are increasing systematically - in 2004 the average cost of one sqm grew from zł.3,893 to zł.4,323.
It is not only big players from Ireland that are conquering the Polish real-estate market. Private individuals are also looking for an opportunity to earn, largely by buying flats to rent. This was also confirmed by the organizers of the Dream Time conference on residential property investment in Poland. "We have had more registrations from individuals coming to the conference from England and Ireland than from property professionals from Poland," said Ernest Kiruja, head of Eurobuild, one of the Dream Time organizers.
"While EU accession was important, that's only part of the story," said Morris. "Poland is seeing the largest migration in decades, with Warsaw's population growing half a million since 1991. Yet the capital city still claims less than five percent of the total population. To reach 10 percent we will see another two million people arrive, seeing the higher wages and living standards of the capital. With only 12,000 flats built a year here, what do you think will happen to prices?" Morris asks rhetorically. Indeed, prices on the Warsaw residential market have gone up by 10 percent annually in the last few years and it is believed that it is just the beginning of the cycle.
In 2004 the total value of Irish investment in Poland was $1.100 (zł.3,680) billion, which makes Ireland the 14th biggest investor in this country. The biggest players are Allied Irish Bank, MC Building Chemicals and Herisson Ltd.
Poland is 25 years behind Ireland, according to the managing director of Ober-Haus Real Estate, Peter Gage Morris. The situation in Poland now, just after its accession to the EU, resembles that of Ireland when it was knocking at the EU's door in 1973, i.e. it is "a poor backwater country, mostly agricultural," with "high unemployment" and dotted with "state-owned industries."
"Buying property was absolutely crazy" in Ireland 25 years ago, said Morris, but "now we all wish we had done it." Maybe this is why Irish investors make up a significant proportion of the foreign investors interested in Polish real estate, as they expect the situation to progress analogically to the Irish market.
In the last 25 years Ireland recorded 6.5 percent unleveraged annual growth, 14.8 percent annual growth to the 80-percent leveraged investor, and over 50 percent return on equity to the leveraged investor. The Polish real-estate market is already rocketing, and additionally the country has many things in common with Ireland at the start of its property boom.
As in Ireland many years ago, Poland has impressive prospective inward investment, reaching EUR 11.4 (zł.46.4) billion from structural funds alone in the next two years. Another factor is cheap labor, which is one of the main draws for foreign investment. This, in turn, is very likely to increase dramatically in the next seven years or so, as the examples of Ireland, Spain and Portugal show in their adventure with the EU.
The average wage in Poland is 21 percent of EU levels and, as experts predict, as it catches up with European rates a growth in property prices will follow. Also, relatively low taxes can attract investments, thereby boosting the property market. Although the 19 percent corporate income tax is not as low as in Ireland (from 10 to 12.5 percent), "it is low enough," stresses Morris. As was also the case in Ireland, the Polish currency, already stable, will gain an even stronger position after joining the eurozone in five years' time.
Foreign investors in real estate, among them many Irish, have already spotted the Polish property El Dorado. According to the Irish Embassy, every month a few Irishmen seek help to buy a flat in Warsaw. They are a nation fascinated by Polish real estate. On the one hand they feel safe on a market similar to theirs, and, on the other, opportunities on the Irish property market are running out. "One sqm [in Ireland] costs zł.30,000 to zł.40,000. This price is unlikely to grow further, that is why it is difficult to buy a flat and make a profit on it," says Bogumił Rutkowski from Knight Frank. On the contrary, in Poland prices are increasing systematically - in 2004 the average cost of one sqm grew from zł.3,893 to zł.4,323.
It is not only big players from Ireland that are conquering the Polish real-estate market. Private individuals are also looking for an opportunity to earn, largely by buying flats to rent. This was also confirmed by the organizers of the Dream Time conference on residential property investment in Poland. "We have had more registrations from individuals coming to the conference from England and Ireland than from property professionals from Poland," said Ernest Kiruja, head of Eurobuild, one of the Dream Time organizers.
"While EU accession was important, that's only part of the story," said Morris. "Poland is seeing the largest migration in decades, with Warsaw's population growing half a million since 1991. Yet the capital city still claims less than five percent of the total population. To reach 10 percent we will see another two million people arrive, seeing the higher wages and living standards of the capital. With only 12,000 flats built a year here, what do you think will happen to prices?" Morris asks rhetorically. Indeed, prices on the Warsaw residential market have gone up by 10 percent annually in the last few years and it is believed that it is just the beginning of the cycle.
In 2004 the total value of Irish investment in Poland was $1.100 (zł.3,680) billion, which makes Ireland the 14th biggest investor in this country. The biggest players are Allied Irish Bank, MC Building Chemicals and Herisson Ltd.
