Take a deep breath, this is a long post!
It’s almost exactly three years since I last pontificated (on 20 east) about the housing market in Poland. The question is, has anything much changed since then? A question particularly important to my family right now as we have recently started looking for somewhere to buy.
Well, without wishing to boast, I think pretty much everything has gone as I anticipated. I said “The prices are not going to rise over the next 3 years, possibly longer. My gut feeling is that prices will in fact decline overall and in some cases (location, quality) quite considerably,…” and that’s certainly true but I think there is still further to go. Judging by the amount of property there is for sale, apparently much higher than number of people buying, prices should be lower. A quick scan of one of the real estate web sites shows a total listing of 143,377 apartments for sale in Warsaw and 19,157 houses. Just over 3,000 of the apartments have been added to the list, or updated, in the month of June. My bet is that most of the updating was lowering of prices.
The market today is split into two types of seller –
- those who wish someone would pay them the price they’d like to get.
- those who seriously want to sell their property.
If you spend enough time browsing the offers it is easy to distinguish between the two. Type 1 seller is calculating the asking price by inflating their original investment by 30-50% to cover the Swiss Franc factor and then adding the total cost of their, often times, extravagant ‘remont’ (fit-out). Type 2 are pricing their property according to current market conditions. Having the two types of seller leads to some extremely unfathomable pricing. On our own estate for example, there are a few apartments for sale and the range is between 18,229 and 10,708 (negotiable) per sq m with the majority gathered around 12,500. In the estate we used to live you can find prices ranging from 7,229 (negotiable) to 15,041 per sq m but the most extreme case of price fluctuation is a block close to Łazienki park where some will pay 18,000 while others pay 53,000 for a square metre in the same block! It is a similar story all over Warsaw. There is no significant difference between these apartments, it is simply the type of seller that is making the difference in the price and the mistaken belief that “if someone likes it they will pay my price”.
When we were looking to move last time, the owner of our last apartment made us a ‘special offer’ to buy the place at 9,000 per sq m. It might have seemed a good offer at the time as prices were heading to 11,000 and beyond but I wasn’t convinced and we didn’t buy. I think you’d be lucky to sell that place for 8,000 today and I still think the prices on that estate have room to drop further as better quality and better located apartments are added to the available stock.
Fear not though, if you’ve just arrived from Moscow determined to show what a man you are, Warsaw is not going to let you down. There’s a choice of at least ten apartments costing over 10 million zlots. Yes, 10 million – that’s more than 2 million quid and more than 3.5 million bucks. Go take a look at what you can buy in London and New York for that money and then compare it to the Warsaw options, you’ll be amazed. If your budget is a little more modest, 2 million zlots say, then the choice is far greater with something around 150 apartments to choose from and plenty of houses too.
In 2008 I also expressed a deal of skepticism about the availability of mortgages in any currency other than that of the country, zloty. Swiss Franc mortgages were all the rage 3 years ago with banks flashing sheets that showed that the franc had been reliable as a cuckoo clock for the last thousand years and the low interest rates made repayments much lower. How times change, the same bank that was trying to flog me Swiss Francs 3 years ago is today only offering mortgages in zloty. Most other banks have also ditched the franc. The exchange rate between zloty and franc has drifted considerably in the wrong direction from its long established rate meaning that many are now paying much more each month than they ever intended to. In other words, the price of their property in zloty terms (i.e. real terms) is 30-50% more than they thought they were paying. I still hear people suggesting the Swiss Franc might be a good option as the rate is now so unfavourable that it can only get better. In my opinion, if it can swing from 2.2 to 3.5 then there’s at least as much chance that it will reach 4 or more as there is it will return back to 2.2.
The other currency possibility is the Euro but given whats happening in the Eurozone right now I think you’d have to really enjoy gambling to try that out.
It is astounding that the mortgage currency issue has not made more headlines. If the franc keeps getting worse this could become a very significant problem. I think it’s fair to say that even with the poorer rate, mortgages are still more expensive in zloty but that’s not the point, it is the stability of what is likely to be your biggest monthly bill that’s important.
Let’s look at location and what’s available.
I think a fair generalisation is that all the developers took a couple of years off and then some of them started again within the last 6-9 months. There is a fair amount of new stock coming into the residential market now and as usual most of it is 50-90 sq m in large blocks. Nothing new there then! The prices, however, are new. If you had tried to predict 3=4 years ago the price of the developments going up now you’d have said something around 12,000 per sq m. The headline prices are actually about 8,000.
Despite the renewed activity it is still largely the same boring stuff as before. We were hoping that a little more imagination had crept into the market, nice lofts in trendy Praga for example, but it seems not. There are plans for lofts in Praga but you’ll have to wait a few years more before you can buy one.
Our search so far has covered quite a wide area from the city centre to just outside the Warsaw boundaries in the North, places like Łomianki, Kiełpin, Dąbrowa. The favourites are the area we currently live, Młociny, which is where Zosia has her school and Żoliborż. The trouble with both areas is that they are not cheap and they have limited supply, which is why we’ve widened the search area.
We like the city centre and could afford a good quality apartment of a size big enough for most families. However, we’d have to move Zosia to a different school and that’s not a great idea as she’s very happy where she is now. Also, although 90+ sq m is plenty of space we’ve got used to more than 150 and so anywhere less than 120 feels cramped and will not work well with our furniture. As mentioned earlier, we like what’s happening in Praga but there’s very limited stock available of the sort of thing we’d invest in.
The most surprising thing has been the difference between being in Warsaw and being outside. We live just within the northern border of Warsaw but if you drive 5-15 minutes north you have districts such as Łomianki, Dąbrowa, Kiełpin and so on. The drop in price between Młociny and these places just outside the border is amazing considering the very short distance. Given that for us the first stop in the morning for us is Zosia’s school, the difference is between spending 5 minutes to drive Zosia to school versus 20 minutes (traffic willing). For that small amount of daily pain you can save around 500,000 zeds on a like for like basis!
A real life comparison of the difference – two places we have viewed and considered:
PROPERTY ONE – An apartment in Warsaw, Zoliborz, on a pretty good quality development not high rise but still a fair number of residents. Apartment is 103 sqm with a roof terrace of 106 sq m. It is offered in developer’s standard finish, i.e. all you get are the walls, windows and a front door. Next door to Bielanski forest on one side but also next door to the busiest road in Warsaw, an office block and a small bus depot on the other. The roof terrace was never meant to be one judging by the construction, the roof is finished in soft felt and you are surrounded by chimneys. To get to the roof they have stolen space from the lounge to build a staircase making the lounge smaller than it should be for the size of apartment. The only way to get two underground parking spaces is to have one behind the other so the front car is always blocking the back. There’s no space to park on the street either or anywhere nearby as all the pavements have been planted with stripey bollards. There’s also no basement store rooms available now. Price after negotiation (150,000 saving) was 1,356,000. Add to that around 400,000 for finishing the place and you can move into a finished apartment for about 1.75 million.
PROPERTY TWO – A detached house outside Warsaw in Kiełpin, 12 km away from property 1. A nice small to medium sized, fenced, development. Better quality than many in that area. Plot of around 1,000 sq m with a decent looking house of circa 270 sq m. We’ve looked around a couple of identical places that were finished and you can create a very nice living space. Also offered in developer’s finish. Downside of not knowing for sure what’s going to be built on adjacent plots & distance from Warsaw. Price before negotiation 1.1 million, say 1 million after some haggling. Cost to finish around half a million so you can move in for around 1.5 million.
A move of 12 km gets you a huge difference in living space and 250,000 in your back pocket. That’s a much bigger difference than I would have expected.
So to recap – prices have dropped but might have further to go in some cases, although there are still many owners who have not yet realised this. New development has started again. Mortgages are slowly becoming more sensible. Real imagination in terms of what is being built is still lacking.
What of the future? If I think prices might drop further you might ask why we are considering buying right now? Well, firstly I should define “drop”. Let’s say that I think the right price today is 10,000 a metre, there are approximately 15% of sellers who agree and whose property is priced accordingly. For the other 85% the price will drop, in actual fact they will lower their price to meet the reality of the market. The bigger question is whether my 10,000 will also drop. I think it might but probably not below 9,000 and not for very long. On the other hand I do think Poland is on a strong upward trajectory and things like next years football championships will only enhance the attractiveness of the Warsaw market so prices could start to rise again. In short, I think there’s more upside than downside, certainly over a 5-10 year time frame. One significant change is that I’ve given up being concerned that Warsaw property in its entirety is over-priced compared to other cities. It is and it probably always will be.
I also think my family have been patient long enough, twelve years is a long time to wait for a “place of their own”. I’m not getting any younger and can already only get a mortgage for 17 years (although some banks think I can work ’till I’m 80!). Surprisingly there is not a significant difference in cost over one of 30 years but nevertheless. Last but not least is the fact that our kitchen is rubbish and I’m not investing in a new kitchen for a rented flat!
HOT OFF THE PRESS – Since I started writing this post we have viewed and had an offer accepted on an apartment in Młociny. I’ll be back with more of the boring details as things progress.