Poland’s Spending Spree

Fresh on the heels of poor results for Q2 2008 GDP growth throughout most of Western Europe, Poland comes up trumps on several economic fronts, all of which confirm this former Eastern block’s potential for property investment.

Data released by Poland’s Central Statistical Office shows a huge increase in consumer demand. Year-on-year retail sales rose by a massive 14.2% from July 2007 to July 2008 confirming that the Polish population is exercising considerable spending power. One of the reasons behind Poland’s booming consumerism are higher salaries – wages generally have increased by 10% over the last 2 years.

Better wages reflect the improved job market in Poland where there are plenty of employment opportunities created by the booming economy. Poles who had previously relocated abroad, particularly to the UK and France, are now returning home in search of a better job and as a result, unemployment continues to fall consistently. The figure of 9.4% for July is the lowest since 1991 and this trend looks set to continue in the near future.

Figures for Poland’s GDP growth during Q2 have not yet been released and although analysts expect these to be slightly below those for Q1 (6.1%), they are forecast to be well on track for the Economist prediction of 5.4% for 2008 as a whole. Poland’s figures of 6.6% for 2007 were among the best in Europe and well ahead of most of its fellow EU members.

As well as a boom in consumer spending, another sign of Poland’s increasing wealth is its rising number of billionaires. Forbes reports that 6 out of Eastern Europe’s 16 new billionaires in 2008 come from Poland and 5 have the majority of their net worth tied to the Warsaw Stock Exchange. The WIG index saw gains of over 10% in 2007 after 4 years of increases in excess of 25%. Main traders of the Warsaw Stock Exchange include property developers, reflecting the country’s booming construction industry.

The combination of rising wages, falling unemployment and increased spending power mean the demand for housing continues to rise. Poland’s property market has seen some spectacular recent rises – Knight Frank reported a massive 22% in Q4 in 2007 – and although most experts predict more moderate increases for 2008 (between 5% and 10%), they forecast greater things for 2009 and beyond. Property is expected to boom on the back of EURO 2012, which Poland is co-hosting with Ukraine.

According to the Knight Frank Global House Price Index for Q1 2008, there is generally a shortage of houses throughout Poland meaning they are keeping their value. Moderate over-supply of apartments has led to some price drops, but with consumer spending on the up, this tendency is not expected to last. “The excellent economic figures recently issued by Poland show one of the healthiest economies in Europe,” comments James Gonzalez, Market Analyst at Obelisk.

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