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The Warsaw Voice » Real Estate » July 30, 2008
The Real Estate Voice
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Buying Property in Poland
July 30, 2008   
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Foreign purchasers have been showing a keen interest in Polish real estate over the last few years, especially residential apartments and commercial premises.

Restrictions on foreign real estate purchases in Poland have been eased considerably since the country joined the EU in May 2004. But foreigners still require a permit, valid for two years as of the date of issue, from the Ministry of Internal Affairs and Administration.

All things permitting
EU citizens who have held a permanent residence card for at least five years only require a permit to purchase real estate in a border zone or farming land of more than a hectare. The same goes for foreigners married to Polish citizens who have held permanent residence cards for at least two years.

"Citizens of European Economic Area (EEA) countries do not require permits provided they hold stock in commercial law companies whose registered office is in Poland," says Monika Wójcik, a financial advisor from the consultancy company Money Expert. EEA citizens will not require permits after May 1, 2016.

Polish law places no restrictions on the number of residential apartments a foreigner may purchase. Foreigners are, however, required to have a licensed translator witness the signing of the notarial deed.

As of this year, individuals who sell property within five years of the end of the calendar year in which they purchased it, are subject to a 19-percent capital gains tax. Real estate sales by companies are treated as corporate revenue and subject to a 19-percent capital gains tax.

Giving credit
Many of the foreigners buying property here are taking out Polish mortgage loans to finance their purchases. "The main reason for this is that Polish mortgage loans are often cheaper than those in their home countries," says Wójcik.

Polish banks are taking an increasing interest in foreign clients. Some have already introduced loan application forms in English.

Applicants should submit a completed application form together with any required documentation on the property in question and its purchase, as well as documentary evidence of their financial standing.

The documentation required will depend on the applicant's place of residence and occupation. Applicants residing and working abroad are required to attach evidence of earnings, such as a contract of employment, a copy of their most recent income tax returns or similar documents, and their most recent quarterly bank statements. They also need to verify their creditworthiness by providing access to a credit rating agency or a website like checkmyfile.com or experian.com. Documentation submitted in other languages must be translated into Polish by a licensed translator.

Non-citizens living and working in Poland have to furnish a statement of earnings from their employer on a form provided by the bank. They also need a permanent or temporary residence card. Some banks will waive this requirement for EU citizens but they will still want to see their EU Registration Card or their Right of Residence.

Fly to buy
The number of foreigners buying up apartments in Poland to resell at a profit has been growing spectacularly for several years now. The period spanning 2005 to mid-2007 was particularly kind to speculative purchasers, with prices in places like Warsaw experiencing double digit annual percentage increases.

The Ministry of Internal Affairs and Administration reports that foreigners purchased 1,998 apartments in Poland in 2006 compared with 703 in 2003. The data has been collected from notaries public and land registers held in courts.

"Foreigners have been buying up apartments for resale over the last three years or so as prices have been going up constantly," says Wojciech Gepner, press officer of developer Echo Investments. "Spanish and Irish purchasers have been leading the pack, investing in places like Warsaw, Wrocław, Cracow and the Gdańsk-Sopot-Gdynia Tricity. They've mainly been buying two-room apartments of 50-55 sq m."

"Foreigners have seen buying up property in Poland as the road to huge profits," says Sev Zakrzewski, managing director of Keen Property Partners. "They've shown a preference for new apartments to rent out or sell at a profit, sometimes even before construction has been completed. Up to 85 percent of the apartments purchased by foreigners have been earmarked for rent, according to some sources," he adds.

Market stabilizing
The number of apartments being purchased by foreigners has tapered off recently. Zakrzewski puts this down to falling real estate prices and the relatively high cost of Polish apartments.

The residential property boom has seen a correction and prices have begun to stabilize.

Gepner agrees. "We're not seeing any interest from foreign purchasers now that the market is stabilizing. This is also related to their own economic situations. Spain, for example, is battening down for a recession. The foreigners we see buying apartments in Poland now are planning to stay here long term, perhaps even for good."

Gepner believes most of these purchasers are high earners from the U.S., Britain, France, Japan, Korea and Vietnam. They go for large, quality apartments in prime locations. They are mostly interested in the proximity of schools for their children, downtown transport links, greenery and safety, and show a particular predilection for fenced-off estates with monitoring and security.

Agnieszka Domańska
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