Real estate prices continue to rise
Kinga Rodkiewicz | 25th January 2008

High property prices in Poland are prompting many developers to try and renegotiate their purchase contracts.

High property prices in Poland are prompting many developers to try and renegotiate their purchase contracts.

If the renegotiation is rejected, developers sometimes just break their contracts and pay fines to the property owners.

"Actually, many developers have broken agreements, paid the fines and bought land somewhere else," said Jacek Bielecki, a director of the Polish Association of Developers. "It is a clear business calculation. The situation should persuade property owners to reduce their prices."

According to Bielecki's view, land prices have been rising very quickly because of speculative capital, especially Spanish. "Actually this speculative capital is now pulling out of Poland, so there is no reason for such high prices," he told the daily newspaper Rzeczpospolita.

Experts emphasize that any decrease in property prices will not be a large one.
"Everything depends on location and the property's use," Kacper Zaka of the DI BRE Bank told Rzeczpospolita. "Land for building houses, especially in the suburbs of big cities, is still very popular. That's why I won't predict a big price decline in this category."

However, many developers have walked away from signed contracts. The latest example was in Poznan, where Triton Development withdrew from an agreement to buy 6.8 hectares near Lake Malta. The company planned to build a hall, a hotel, a shopping center and some apartments. Triton promised to pay 40.9 mln zloty for this ground. According to a statement from the company, Triton withdrew from the project after a profitability analysis came up short.

"There are markets like those in Poznan or Katowice where property owners haven't noticed a break in the market. They still demand high prices and that's why we have the failed transactions," said Henryk Feliks, a vice-director of the development company GANT. "On the other hand, in many Polish cities like Warsaw, Krakow and Wroclaw, we can see lower prices than in 2007."

If the exorbitant land prices start to fall, that will be good news for those who plan to build a house.

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