Ready for luxury?

As the number of Poles who can afford luxury apartments increases, Sotheby’s International Realty has decided to enter the market. Are Poles interested in upmarket properties? by Beata Socha [big percent= "45,000"]The number of Poles with net worth of over $1 million[/big] The value of the luxury residential market in Poland stands at a little below PLN 1 billion a year according to KPMG. As the economy continues to develop, the number of wealthy Poles is growing steadily. In 2013, there were close to 40,000 individuals with assets worth between $1-5 million, another 3,000 in the $5-10 million bracket and 1,670 worth $10-50 million, according to Credit Suisse’s Global Wealth Databook. According to forecasts, the number of Poles with assets over $1 million could see a double-digit increase by the end of the decade. “I believe that Poland is doing substantially better than Western Europe. Most young Poles believe that their quality of life will be better than that of their parents, which is not something you can say of people in France, Germany or the US,” said Asaf Gottesman, co-founder of Gottesman-Szmelcman Architecture, the author behind the architectural concept of OVO Wrocław. Market players seem confident about the future of the luxury residential market in Poland. So much so, that a major international agency, Sotheby’s International Realty, opened its first office in Poland in November. The company will offer luxury apartments and houses as well as commercial properties to wealthy Poles. It will also sell upscale Polish properties to international clients. Apart from its flagship office in Warsaw, Sotheby’s plans to launch regional offices in major Polish cities: Wrocław, Kraków, Poznań and the Tri-City. Sotheby’s services will also be available to clients of Noble Bank’s private banking services in all of its offices across Poland. “We have been monitoring the market for some time now and I’m convinced this is exactly the right time to introduce this type of service. Over the past few years, real properties in various places around the world have become accessible to Poles,” said Arkadiusz Wojciechowski, managing director of Poland Sotheby’s International Realty. Inbound demand Market analysts are a little more conservative in their optimism. “I’m not entirely convinced that there is enough demand from rich Poles. I think that the real reason behind Sotheby’s entry into Poland is to offer Polish real estate to foreigners rather than the other way around,” said Bartosz Turek, market analyst at Lion’s Bank. “I know there are foreigners interested in Polish land due to its 380 percent price increase in less than 10 years. There is also a demand for unique apartments, which are still much cheaper than elsewhere. Not to mention purchases of properties for rent, which can generate appealing yields,” he added. Developers of luxury apartments are already seeing some demand from outside the country. “About 15 percent of the clients are internationals with Polish roots. Those people are planning to live in Poland or buy apartments as a form of investment,” said Ron Ben Shahar, co-owner of Angel Wawel. “Poland has become more international, its market is well-known, especially in the European Union. Ukrainians as well as Russians are also potential buyers given the current political climate. One of our clients was a Ukrainian member of parliament, probably looking for security for a rainy day,” he added. Sotheby’s predicts that international investors will be interested mostly in properties along the seaside, in towns like Sopot and Jastarnia, in the Mazury lake district, in the mountains and in major cities: Kraków, Warsaw and Wrocław. “The hundreds of historical properties, such as palaces and manor houses, before or after renovation, are also Poland’s forte,” the firm said. [negative]“the real reason behind Sotheby’s entry into Poland is to offer Polish real estate to foreigners rather than the other way around.[/negative] Ballpark figures The main allure of the Polish residential market is, no doubt, its prices, which are still significantly below Western levels, including the upmarket segment. While the average price of a higher standard apartment in the center of Warsaw stands at PLN 13,000-15,000 per sqm, it’s four or five times higher in Paris. “The difference is even greater compared to London, New York and Singapore, not to mention Monaco and Hong Kong, where the prices are ten times what they are here,” Turek explained. Poland is not even in the ballpark of Southern Europe, which has seen the biggest downturn over the past seven years. “Even in southern European countries suffering dramatically from economic failure, such as Spain, Portugal, Italy, etc., apartment prices are at about €12,000-13,000 per sqm. In Poland, we’re still below that level. In Angel Wawel, we are at €4,000-5,000 per sqm,” said Shahar. Gottesman concurs. “I think that prices in Poland are still extremely low in comparison with other places and I believe there is still a long way to go. I think the luxury market is just at its beginning.” It seems that now is the best possible moment to invest in Polish luxury real estate. But is it really? Opinions vary greatly on where the market will be in the next few years. Some say they might even double in the next few years, others predict the market will mature more gradually. “As Poles’ wealth increases, so will the prices. But that’s a long term perspective of some 20-30 years,” Turek explained.