Even two years ago financial institutions were willing to finance up to 100% of property value. In 2009 only few projects in Warsaw obtained investment approval, and they were mostly small scale, perfect locations with confirmed tenants. The required down payment rose to minimum 30%, and apart from classic security, being the property mortgage, financial institutions demanded additional warranties.

Percentage share of properties in general investment portfolios has not been adjusted abruptly, but only for funds operating for years. Investors in property backed securities tried to sell, however even at the estimated loss amounting to 15-30%, it was difficult to find buyers. Developers stopped purchasing land even last year and they have been using almost solely land held for future use. Attempts at selling commercial lots by local governments and public institutions (seen to be a panacea of sorts to alleviate decreasing profit) usually ended unsuccessfully at the first try. As of now, there are no indications that this seller group was willing to cut asking prices to the level enabling closing transactions, since the political repercussions of accusations of selling lower then the actual property value are to be reckoned with.

However, in the last few weeks some cash-paying investors have appeared, albeit willing to pay cash only for particularly attractive properties, owners of which have been willing to cut prices to a level preceding the sudden growth of the last few years. I think this tendency could be seen as a first sign of the property market coming back to life and the tendency change foreseen by the speculative investors to take place in the two coming years, as this is the maximum period this group is willing to wait to collect profit on the growing property market.

Janusz Lipiński
Member of the Council of the European Property Institute Foundation, real estate counselor, property appraiser
Source: Property Jornal Polska Giełda Nieruchomości 12-01/10