Finance Dublin
Finance Jobs
Saturday, 13th April 2024
    Home             Archive             Publications             Our Services             Finance Jobs             Events             Surveys & Awards             
Poland offers opportunities to Irish investors Back  
Brian O’Neill explains the dynamics of the Polish economy, the potential of the residential property market, and how to capitalise on these factors, using the various investment options available to Irish investors.
There is an increasing desire from Irish investors to diversify their investment portfolios by exploring alternative investments and assets that could provide stronger returns - property investment is no exception. Due to strong economic growth following accession, many investors have turned their attention to the new EU states, where there are some interesting alternatives available in the residential property market. Poland, the largest of the accession states in 2004, has an economy that is continually strengthening and its major cities have seen the highest levels of Foreign Direct Investment in Europe, underlining its excellent investment potential.

As we have seen in Ireland, the advantages of EU membership and an improving economy creates a growing property market. Irish investors are well aware of the benefits of property investment and the opportunities of strong capital growth in a maturing major EU economy, such as Poland, cannot be ignored. To understand the rationale for investing in residential property in Poland, we first need to understand that country’s basic economic climate and how its fiscal factors are making its major cities highly attractive for investors.

Poland is in the heart of Europe and, because of its central location and numerous borders, can be considered the gateway between Eastern and Western Europe. Poland has a larger population and stronger economy than any of the other May 2004 entrants to the European Union. Much of this economic growth is attributable to the high level of exports, more efficient production techniques and increased foreign investment in addition to the benefits of economic convergence with EU levels - lower interest rates and inflation
• Poland’s GDP grew by 4.8 per cent in 2004 and 5.1 per cent in 2005 - significantly higher than the growth in the 12-nation Euro Zone (where GDP was only 1.3 per cent). It is also forecast to increase
by a greater amount than any other CEE state over the coming years
• In 2004 GDP was €206 billion. It is estimated at €248 billion for 2005, rising to €333 billion by 2010. Poland’s inflation rate is among the lowest in Europe at 1.6 per cent (EU average 2.5 per cent)
• There is just 5 per cent unemployment in Warsaw, which is well below the national average
• Total Gross FDI in Poland is estimated to be €8.73 billion this year and is forecast to outperform Central-Eastern Europe as a focus for foreign investment over the next five years.

With a population four times the size of Hungary and the Czech Republic, Poland holds tremendous demographic advantages over its CEE neighbours. Its capital Warsaw is the largest city by population and area, with a low urban density relative to other European capitals. Warsaw’s two million population, which has grown by half a million since 1991, still only constitutes 5 per cent of the country’s overall inhabitants, well below the EU average of 10 per cent. Warsaw, however, is expected to double in size in the next 10 years, with an estimated 100,000 people migrating to the capital each year.

Demographics are forecast to work in favour of investors in the housing market, with the baby boomers born during the martial law era, due to produce a glut of first time buyers in the next five to 10 years. As the economy strengthens and cultural and law reforms move increasingly towards westernised standards, there is an increasing need for higher standard inner-city apartments.

In fact, figures from The Housing Research Institute suggest that there is an estimated shortage of one and a half million apartments in Poland. It is also estimated that one million housing units are in a poor state of repair, with over 50 per cent of all existing housing stock from the Soviet era having been built before 1970. Approximately 10 million people (25 per cent of total population) live in pre-fabricated Communist-era block housing which needs replacing.

In 2001 the residential mortgage market was young and stifled by 20 per cent interest rates on PLN (Polish Zloty) and a small percentage of qualified homebuyers. Mortgage rates are now at an all time low and vary from 7.6 per cent – 9.5 per cent PLN. Helped by an improving economy and wages rising consistently over the last five years, the mortgage market is one of the fastest growing sectors in the country and local buyers are becoming increasingly prominent, having access to 100 per cent home loans.

Warsaw housing supply
Warsaw is divided by the River Vistula into two distinct parts. The more up-market western bank of the river is where Warsaw’s majority of enterprises, banks, theatres and cinemas are situated. The eastern side, Praga, is rapidly developing with new shopping centres, modern office buildings and apartment blocks.

The total value of the Warsaw residential property market is currently estimated to be €2 billion (PLN8bn), with a city-wide average of almost €2,000 per sq m. Prices are highest in prestigious locations on the west bank of the Vistula: Sr?dmiescie, Wilan?w, Mokot?w and Zoliborz, where prices are between €1,500 to €2,200 per sq m for standard units and up to €4,000 per sq m for high-quality unit.

According to local agents Knight Frank, demand is strongest for one-bedroom units of up to 55sqm and two-bedroom units of up to 70 sq m. Higher quality dwellings of 80sq m to 120sq m are also increasing in popularity.

With the prospect of Poland joining the EU, housing demand grew by impressive rates prior to its accession in 2004. Warsaw’s residential prices grew by over 25 per cent in euro terms for that year. Average house price appreciation over the last few years has reached 15 per cent per annum.

Prestige Group has been active in the Central and Eastern European residential property markets having sourced investments in excess of €200 million in the area to date. We currently have two investment offerings in the Polish Market:

Poland development scheme
Our Poland Development Scheme is an opportunity for investors to participate in hassle-free property development, with consistent returns and a clear exit strategy. We will raise €20 million from investors, via a loan agreement structure, returning an estimated 80 per cent over the projected five-year investment term. Investment into this Scheme is on a strict application basis. Monies raised will be used to secure a minimum of three land sites for residential development, which will provide the units to for sale to local buyers to meet the undersupply of housing in the Polish marketplace. Minimum investment into the scheme is €50,000, with multiples of €25,000 thereafter. An investment of €100,000 (which is net of a 3 per cent application fee) is estimated to return €174,600 (before tax) in year five. It offers residential property investors the opportunity to share in developer profits through a tax-efficient investment.

Buy-to-let opportunity
Many investors prefer the traditional buy-to-let route and our Piaskowa development, about to be launched this month, is one such opportunity. Made up of exclusive studio, one, two and three-bedroom apartments, Prestige Group’s Block, within the Piaskowa three-phase development, will total 45 units. Unit prices range from €114,500 up to €255,900, depending on the size of apartment. Internal square footage averages 37 sq m to 102 sq m. Unlike other phases of the development, which are being offered on the local market as bare-shell structures, Prestige Group investors will benefit from prices that are inclusive of an exceptional fit-out comprising of high quality kitchen, bathroom, flooring and other fittings. We have also structured the offering to provide investors with a 5 per cent guaranteed rental yield in the first year, ensuring a hassle-free hands-off investment from the outset.

The above opportunities provide two alternative ways to achieve significant investment returns in an exciting market. The economics and market dynamics within the residential property sector in Poland provide a serious opportunity for Irish investors.

Digg.com Del.icio.us Stumbleupon.com Reddit.com Yahoo.com

Home | About Us | Privacy Statement | Contact
©2024 Fintel Publications Ltd. All rights reserved.