A booming economy, growing tourism industry and wealth of both old property and new-builds on the market has resulted in a fast-growing Polish property market. 

However, like most other world destinations that have relied heavily on foreign investment from the UK and US, Poland has not escaped the effects of the credit crunch.

"It is true that foreign property investment has slowed," says Neil Lewis of Property Secrets. "I was quoted a figure of 70 per cent lower by one British agent. However, at the same time local demand appears to be strong and picking up any excess supply."

Investors looking to put their money in Polish property have always concentrated on the big cities, and Lewis confirms that this is still the case. "The already established cities, such as Wroclaw, are showing confident and rapid economic growth couples by demand for property either to buy or rent or both. Hence, prices are rising and demand is growing. Nevertheless, the rather sudden removal of a plank of foreign investor demand means that the market will grow at a steadier (10 to 15 per year) rate rather than breakneck speeds (over 30 per cent per year)."

Warsaw and Krakow are still seeing steady price rises; but there are areas of south and central Poland in which Polish property prices are actually falling, according to real estate portal Oferty.net. Sopot in the north and centrally located Lodz have seen the most significant prices depreciations, at 5.3 and 5 per cent respectively since the beginning of this year. On the other hand, Lublin, in the south east, and Gdansk (pictured) in northern Poland, are still enjoying significant price increases.

Some experts are now recommending that investors look away from the big investment hotspots and turn their sights towards Poland's undiscovered towns in order to make the most of their money.

"The market is very exciting and there is still a lot of potential amoung Poland's smaller cities for prices to rise from a lower starting point compared with more established markets such as Warsaw and Krakow," says Director of Emerging Poland, Patrick Martin. He recommends Poznan as a good starting point for Polish property investors, because "most of the demand is from local people."

Lewis agrees that investors need to be looking outside the box at the moment. "Some cities, such as Ostrava and Frydek Mistek, remain undiscovered and hence can offer very sudden and rapid price growth for the smart investor," he says.

Most experts seem to agree that growth in Poland over the next few years will depend on local and returning residents. AIB Capital Investment Markets is one company that has invested heavily in Poland and relies on the local to keep the Polish property market strong.

"Polish property is now at an attractive point in the cycle and should, given accession to the EU, provide good returns as values converge with other European markets," says General Manager Patrick Cuneen. "To date, foreign capital has provided the main impetus to property development and investment markets. We hope the continuing development of the market will allow more local players including pension funds to participate in the investment property market in a way that mirrors the development in other countries."

Tim Hill, author of Buying in Poland, is also confident that Polish property will not be adversely affected by the Western credit crunch. "Legal restrictions stop a foreigner buying more than one Polish property, which means the recent boom has been caused by the Poles themselves and real estate still remains affordable to the domestic market," he says. "We can add on top of this the fact that lenders to Polish buyers have always been exceptionally prudent. A purchaser with a good job is expected to put down a deposit of between 20 and 40 per cent. So while banks in European countries are changing their criteria, in Poland the situation remains unchanged."

A further boost to Polish property should be provided by the recent International Real Estate Symposium and Exposition CEMP 2008 held in the Polish capital of Warsaw. The event gave Poland the opportunity to attract foreign investment by showcasing its investment possibilities and presenting information about its business climate. 

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Article first published 19 May 2008