With Europe in meltdown, is Poland an exception? Europe's sixth-largest economy has strong domestic demand, and has not yet adopted the euro: so it was able to devalue the zloty to maintain competitiveness. Poland's economy grew by 3.8% in 2011, and is expected to grow by 2.5% in 2012 and 2.5% in 2013 (OECD forecast November 2011).
Though private consumption is expected to slow, increased exports should compensate for weaker internal demand, allowing the budget deficit to fall from its present 5.3%.
Property slowdown worrying
Yet Poland's housing market was Europe's second-worst performer in 2011, down by 10.55% in inflation-adjusted terms.
Prices fell less in major cities, but the downturn is significant:
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- In Warsaw, the average price of "exposed units" (i.e. used units) fell 6.6% in 2011 (6.97% in real terms), according to REAS.
- Krakow used dwelling prices fell 5.53% (5.90% in real terms).
- Poznan used dwelling prices fell 4.57% (4.95% in real terms).
- Lodtz used dwelling prices fell 5.46% (5.83% in real terms).
- Tri-City used dwelling prices fell 3.44% (3.82% in real terms).
- Wroclaw used dwelling prices fell 8.39% (8.75% in real terms).
Compared to pre-crisis peaks:
- House prices in Warsaw are down by 13.63% (13.53% in real terms).
- In Krakow, house prices are down by 11.80% (13.2% in real terms).
- In Lodz, prices have fallen by 17.87.% (17.67% in real terms).
- In Tri-City, house prices plunged by 25.22% (26.62% in real terms).
- In Wroclaw, house prices are down by 31.91% (31.81% in real terms).
- In Poznan, property prices plummeted by 44.08% (44.18% in real terms).
In the fourth quarter, prices of used dwellings continued to fall in all major Polish cities.
Market swamped by unsold units
The number of completed but unsold units increased by 11% in 2011, despite dwelling completions falling 3%. Forced sales by cash-strapped owners added to the total, so the housing market is awash with unsold units.
However, building permits recovered slightly in 2011, growing 5.2%. Dwelling starts also rose, by 2.6%.
The EU brought a housing boom
After the shift to a market-based economy in the early 1990s, the Polish economy experienced nearly two decades of 5% annual growth. Unemployment fell dramatically from 19.9% in 2002, to 7.1% in 2007, and the Polish mortgage market exploded. Outstanding housing loans increased from 1.3% of GDP in 2000, to 16% of GDP in 2009.
Buyers were typically relatively young (31 years old), had no children (80% of buyers), and bought apartments ranging from 46 to 60 sq. m.
