13.09.2006    The Panalyst Perspective

Welcome to our look at business and finance in Krakow and Poland.

First time visitors and investors are surprised and struck by the beauty of this city and its cosmopolitan Cracovian way of life. After a few visits and a few enjoyable hangovers the promise of double-digit growth investments beckon and the decision to buy is made.

"Introduction to buying an apartment"

In such a competitive market it can be difficult to find obvious bargains. After a few tentative viewings with overstretched estate agents, nerves can start to creep in for first time buyers, but bear in mind the following:

• The apartment buying process is now well established for foreign buyers. Buying an apartment in Poland is relatively easy compared to the reputation this country has, for bureaucracy and paperwork - Find a property, sit down with a notary, sign the sales contract, wait for the courts to process the transaction.
• Many existing investors who entered the market two years ago have seen at least a doubling in the value of their properties. Property price growth continues to be strong in the old town, Jewish Quarter (Kazimierz), Podgorze and Krakow's many suburbs. There has been talk of a "bubble" but I believe fundamentals (Rising incomes, lack of supply and foreign and domestic demand) continue to drive this market.
• A steady tourist business fills apartments throughout the summer, foreign and domestic students rent in the winter, providing a healthy rental yield.
• Low European interest rates and Swiss franc mortgages mean relatively affordable mortgage payments. Dealing with Polish banks is painful but they have steadily improved their customer service and product offerings.
• You will own property in one of the most beautiful and enjoyable cities in Europe!

Commercial properties: Land land land

As many domestic residential buyers were priced out of the city centre, the suburbs of Krakow have grown rapidly. Land therefore remains an attractive investment, but I would recommend focusing on plots which are "building land" and which have existing permissions, rather than dealing with a complicated and long application process. For example the city has arcane zoning plans and rules and the town planning office regularly rejects first draft architect proposals without reason.

Of course there can be pitfalls and problems operating in Poland but the potential gains in most cases more than compensate for these. These risks can be substantially mitigated, by working with a reputable real estate agent/consultant and knowledgeable notary/lawyer. Beware however sellers who constantly change their minds!

Next month "Poland's undiscovered cities".

Tej Panesar - CEO of Panalyst