Irish buyers hit the headlines in Polish capital

Profile: Warsaw Irish investors are piling in to Warsaw and have created quite a stir in the market, reports Derek Scally in Warsaw

Irish investors are making a stir in Poland. Last week the country's leading newspaper, Gazeta Wyborcza, pinpointed the Irish as the greatest investors in the Polish property market. Budapest is passé, Warsaw is in.

The city is the centre of Polish life, although it is home to only 1.5 million out of a total population of 40 million.

Looking down at the city from the Palace of Culture, the tower presented as a gift to communist Poland from Stalin, Warsaw doesn't appear to be a great beauty. The chaotic skyline is the legacy of the Second World War and the Nazi's destruction of the city, building by building, as they retreated in 1944. But a walk around reveals a buzzing city full of new restaurants, construction projects, such as the gleaming towers of the financial district, and huge new shopping centres.

The winters here are hard but, in the summer, Warsaw has a beauty all its own, whether in the stunning Lazienki Park or the Old Town, reconstructed brick by brick after the Second World War.

Property prices in Warsaw are up to eight times lower than in London or Paris but are rising fast. The first signs of interest from Irish investors in the Polish capital came at the end of 2003, but people only started buying last year.

Hamilton Osborne King (HOK) has established itself in Warsaw through its Czerska apartment development in the Mokotów neighbourhood.

Launched last November, HOK sold 30 units in a 55-unit development from the plans in two days. The first development has sold out and the second development is now on sale.

"We weren't that interested in getting into Budapest as there were too many people already there. We thought Poland looked really good," says Helen Faley, international sales co-ordinator in Dublin.

The first lesson for all potential investors is that new Polish apartments tend to be sold as a shell: a concrete box with one coat of paint and connections, without any fixtures and fittings, they often don't even have internal walls. This allows maximum flexibility but can be a minefield for foreign investors. To spare Irish buyers the hassle, HOK has put together a package to organise the final fitting.

HOK and Knight Frank, its Warsaw partner, only offer Irish clients modern developments, as they believe these apartments are built to a higher standard and offer the best capital appreciation.

Bogumil Rutkowski of Knight Frank in Warsaw says investors can expect to have a 6 to 8 per cent return.

"But no one here would guarantee you that, the way they would in Ireland," he says. Analysts predict that the market will take off in the next two to five years.

Czerska has 41 sq m (441 sq ft) one-bedroom apartments available from €73,176 and two-bedroom 72 sq m (775 sq ft) apartments from nearly €120,000.

It is just one of many new developments springing up all over Warsaw. Over 16,000 apartments were under construction in Warsaw at the end of 2004, with another 52 developments in the planning stage.

New developments are an attractive investment: they are free of stamp duty and, if retained for five years, are free from a 10 per cent tax. But Warsaw-based agents urge caution before buying an apartment, particularly new developments from the plans.

"I have been contacted by a few investors who bought like that and said they were disappointed," says Joanna Ryan, the favourite agent of Irish and British expats in Warsaw.

Ryan, a Polish woman with an Irish husband, set up her own property company, Property in Poland, eight years ago. Her company offers a turnkey service for new apartments as well - taking the pressure off buyers to finish off apartments. But, unlike HOK, Ryan doesn't limit her portfolio to new developments, saying that new doesn't always offer the best quality or best investment yield.

"I give my clients an option. I don't try to sell just one place. I try to give them good advice about how to buy good Polish property at Polish prices," she says.

She keeps a variety of properties on her books, but warns people against considering communist tower blocks of the 1960s and 1970s.

She says many Varsovians want to rent older apartments with character.

Despite the Nazi's best efforts, there are still many beautiful, freshly renovated pre-war apartment buildings in Warsaw with stuccoed, three-metre high ceilings and thick walls that keep the apartment cool in the summer and warm in the winter, and always quiet. Character has a price, though, and newly renovated pre-war apartments can often sell for as much as new apartments.

At the other end of the scale are one-bedroom apartments, growing in popularity among young professionals. A 50 sq m (538 sq ft) new studio apartment in a good part of town goes for between €60,000 and €90,000, while a second-hand studio apartment can be had from €50,000.

The rental market in Warsaw isn't as established as in other European cities, but that is changing, with prices from €9 to €15 per sq m (€0.84 to €1.39 per sq ft) and rising.

Apartments in Warsaw are also very attractive for their low monthly services charge, of around €2.01-€2.76 per sq m (€0.19-€0.26 per sq ft).

Second-hand apartments usually have a lower service charge reflecting the lower running costs.

A huge benefit for Irish investors is the presence of Allied Irish Bank in Poland, through its subsidiary Bank Zachodni. Current rates for mortgages in the local currency, zloty, vary from 7.6-9.5 per cent and would-be buyers should have a deposit of 30 per cent of the purchase price. Fees add up to between 2.5-3.5 per cent of the purchase price.

There are no restrictions on foreigners buying apartments in Warsaw and, although many buildings are co-operatives, agents report no problems with foreign investors.

"In terms of return on investment, Warsaw is the centre point of Poland," says Joanna Ryan of Property in Poland. "Everything here is the best of what's on offer in Poland. The time is right."

Contacts In Warsaw

Property in Poland: Joanna Ryan. E-mail: polish.property@inetia.pl . Website: www.property-in-poland.pl

Hamilton Osborne King: Helen Faley, 01-6181439 or e-mail warsaw@hok.ie

Knight Frank Warsaw: Bogumil Rutkowski, 00-48-22-596-50-50 or e-mail office@knightfrank.com.pl