Market in Depth

Why aren't Polish house prices rising more?

July 25, 2016

With record-low interest rates, constrained supply, and a new housing subsidy program, housing demand in Poland continues to rise strongly. Surprisingly, house price increases have been very minimal.

The average price of existing flats in Poland’s 7 big cities (Warsaw, Gdańsk, Gdynia, Kraków, Łódź, Poznań, and Wrocław) rose slightly by 0.3% (1.3% inflation-adjusted) during the year to Q1 2016, according to the Polish central bank, Narodowy Bank Polski (NBP). During the latest quarter, house prices were up by 0.1% (0.8% inflation-adjusted).
  • In Warsaw, the country’s capital, the average price of existing houses increased slightly by 0.6% (1.6% inflation-adjusted) y-o-y in Q1 2016.
  • Bydgoszcz recorded the biggest increase in house prices of 5.2% (6.2% inflation-adjusted) during the year to Q1 2016, followed by Gdańsk, with a 3.5% y-o-y increase.
  • Other Polish cities with minimal house price increases included Lublin, with a y-o-y growth of 2% in Q1 2016, Poznań (1.5%), Białystok (1.5%), Szczecin (1.4%), Gdynia (1.3%), Opole (1.1%), Wrocław (0.6%), Łódź (0.4%), and Olsztyn (0.1%).
  • Kraków saw the biggest house price decline of 2.9% (-1.9% inflation-adjusted) during the year to Q1 2016, followed by Zielona Góra (-0.9%), Rzeszów (-0.8%), Kielce (-0.7%), and Katowice (-0.2%).

Warsaw has the most expensive housing in the country, with an average selling price of PLN8,658 (EUR1,975) per square metre (sq. m.) in Q1 2016, according to the NBP. It was followed by Kraków, with an average price of PLN6,827 (EUR1,558) per sq. m., Gdynia with PLN6,407 (EUR1,462) per sq. m. and Gdańsk with PLN6,193 (EUR1,413) per sq. m.

Poland house pricesIn contrast, Zielona Góra has the cheapest housing in Poland, with an average price of just PLN3,447 (EUR786) per sq. m. in Q1 2016.

In the first quarter of 2016, the economy expanded by 3% from a year earlier, down from 4.3% growth the previous year. Economic growth is projected to remain strong at 3.6% this year, and at 3.7% in 2017, according to the IMF.

Analysis of Poland Residential Property Market »

Rental Yields

Yields in Warsaw and Krakow are good, at around 6%

Gross rental yields, i.e., the gross return on investment in an apartment if fully rented out, in the centre of Warsaw, are 6.0% for a 90 square metre (sq. m.) apartment. Such an apartment might cost around EUR 1,200 per month to rent, but around EUR 235,000 to buy. There are similar yields on 120 sq. m. apartments, though prices and rents are obviously higher.

These are good yields. Such good yields are obtainable in all Warsaw's central areas such as Mokotów, Śródmieście, and in other areas too. 6% is the normal yield throughout the city, and very small apartments are likely to yield even more (though we don't have the research to substantiate this).

Surprisingly, the same is true of Krakow. Apartments here are broadly similar in price to the less central areas of Warsaw. They return rents of around EUR 11 - EUR 12 per sq.m. per month. A 90 sq. m. apartment in Krakow will cost you around EUR 200,000, and rent for around EUR 1,100, producing a yield of 6.5%. 

The big downside is that round trip transaction costs are high in Poland.  See our  Poland transaction costs analysis and our Transaction costs in Poland compared to other countries.

Read Rental Yields »

Taxes and Costs

Income taxes are high in Poland

Rental Income: Net rental income is taxed at progressive rates, up to 32%.

Capital Gains: Capital gains incurred on properties sold within five years of acquisition are taxed at a flat rate of 19%. Capital gains incurred on properties sold after a 5-year holding period are exempted from capital gains tax.

Inheritance: Gifts and inheritances of Polish property are taxed at progressive

Residents: Residents of Poland pay taxes on their worldwide income at progressive rates, up to 32%.

Read Taxes and Costs »

Buying Guide

Buying costs are low in Poland

Roundtrip transaction costs, i.e., the cost of buying and selling a property, are around 5.35% to 8.10%, with all costs falling on the buyer. For residential apartments, real estate agent’s fee is typically 3%.

Read Buying Guide »

Landlord and Tenant

Law neutral between landlord & tenant, but unstable

Rent: Rents can be freely negotiated between landlord and tenant. Rent indexation clauses are legal.

Tenant Security: However, the general situation over rental laws is worryingly unstable. Strict re-regulation of the rental sector was recently legislated by Parliament. Fortunately, it was declared unconstitutional shortly after coming into law. Populist pro-tenant feeling is strong.

Read Landlord and Tenant »


Economic outlook very positive

Poland gdp inflationIn 2015, the Polish economy grew by a robust 3.6%, its fastest pace since 2012, driven primarily by strong domestic demand, according to the IMF. Economic growth is projected to remain strong at 3.6% this year, and 3.7% in 2017, according to the IMF.

Poland, which does not use the euro, is the only European country that avoided recession during the global financial and economic meltdown. The Polish economy expanded by 3.9% in 2008, 2.6% in 2009, 3.7% in 2010 and 5% in 2011, according to the IMF.

However growth slowed in 2012 and 2013, with GDP growth rates of just 1.6% and 1.3% respectively, due to the recession in the Eurozone, which accounts for over 50% of Polish exports.
The Polish economy bounced back in 2014 with 3.3% growth, fueled mainly by strong domestic demand.

In May 2015, Law and Justice Party (PiS) candidate Andrzej Duda won the presidential elections, displacing Bronisław Komorowski. Duda, a conservative, won 51.55% of the vote, as opposed to Komorowski’s 48.45%. The new president, who assumed office in August 2015, vowed to reverse the increase in the retirement age, and increase tax breaks for the poor.

In the first quarter of 2016, the economy expanded by 3% from a year earlier, down from 4.3% growth the previous year. During the latest quarter the economy actually contracted by 0.1%, but is expected to recover in the second half of 2016 with strong private consumption supported by a new child benefit scheme.

Recently, Fitch Ratings affirmed Poland’s long-term foreign and local currency issuer default ratings at A- and A, respectively, with outlook stable.
Poland’s budget deficit dropped to an 8-year low of 2.6% of GDP in 2015, from 3.3% in 2014, 4% in 2013, 4.9% in 2012, and 7.5% in 2011, according to the European Commission. However, the deficit is projected to increase to 2.8% of GDP this year and to over 3% of GDP in 2017 to fulfill election promises, according to the IMF.

Government debt was around 51.3% of GDP in 2015, down from 56% in 2013. Public debt is expected to increase to 53.2% of GDP in 2018, according to Fitch Ratings.

Unemployment was 9.1% in May 2016, down from 10.7% the previous year, the lowest unemployment since October 2008.

Core inflation fell to -0.8% during the year to June 2016, according to the central bank.

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