Poles’ interest in premium properties abroad has taken a pandemic turn and it looks like this trend is holding strong. There are further reasons for this, by the way.
We are at a special moment in history, politically as well as economically. The changes that are taking place around us are influencing the individual markets, and therefore necessarily also the investment decisions of Poles.
The interest of compatriots in foreign properties has gained momentum during the pandemic and so far is not slowing down. Luxury properties, which are less susceptible to market fluctuations and, what is more, their prices are showing an upward trend, are very popular. Together with members of the Polish Agents Around The World club, we examine why Poles invest in premium foreign real estate and how they do it.
First, however, let’s consider what luxury real estate actually is. When does the popular sector end and the premium begin? Joanna Czapska, CEO of real estate agency Partners International and founder of Polish Agents Around The World, lists the attributes of a luxury property:
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Prestigious location – e.g. a strict city centre, a business district or a place with special assets, such as proximity to the coastline by the sea or a spectacular view.
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High quality of finishing – this refers both to the materials used, for example, by the developer in the construction of the property in question and those used in the finishing of the flat for sale.
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Size – luxury properties tend to be larger than average and are spacious, which is especially evident in communal spaces such as the living room and kitchen.
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Amenities – here “only sky’s the limit”. Amenities such as CCTV and 24-hour security at the property, reception, gym, silent lift in the building, air-conditioning in the flat, etc. are included in the price.
While the first strong wave of interest in real estate investment could be seen in the wake of the COVID-19 pandemic, the second came after the outbreak of war in Ukraine. This is confirmed by members of Polish Agents Around The World representing countries such as France, Spain, Portugal, Italy, Cyprus and Dubai. When asked whether the political situation has affected demand in the Côte d’Azur property market, real estate agent Anna Maria Maliszewska replies: “Avalanche-like”. And this captures the spirit of the changes well. It is worth adding that Poles’ investment decisions are also influenced by developments on home soil. Here, two factors in particular are important: the increase in the number of wealthy people in our country and its economic situation.
- Poles are getting richer: this year’s KPMG report shows that despite the pandemic, the group of people earning more than PLN 50,000 a month increased by 11.6 per cent year-on-year, and those earning at least PLN 1 million a year – by 10.3 per cent. 14.6 thousand compatriots with assets of at least PLN 1 million also increased.
- Price growth and the real estate market: in Poland, houses and flats are becoming more expensive, interest rates on loans are going up, and we have galloping inflation. And although wealthy people are less affected by these phenomena, they influence their investment decisions. This manifests itself, among other things, in an increased demand for luxury goods, including real estate.
The survey “Poles’ attitudes to finance 2022”, commissioned by the Think! Foundation and the Leopold Kronenberg Citi Handlowy Foundation, showed that 11% of our society invests its savings precisely in real estate. However, the pandemic, the outbreak of war across our eastern border, as well as the changes in the country described above, have changed the way we invest and the associated priorities. There are three main reasons for the interest in real estate abroad: the desire to make an investment, the desire to have a second home in an attractive location and to prepare a plan B for unexpected political crises. Let’s shed some light on this.
Let’s start by looking for an investment opportunity. This phenomenon is nothing new. Investors then look at such a property as a capital investment, a hedge against inflation, and sometimes also decide to rent it out so that it generates a steady passive income. From the point of view of investment profitability, short-term holiday rentals are the most profitable, especially if we are talking about real estate in an area frequented by tourists. Here, the eyes of Polish investors are particularly directed towards European coastlines such as Spain’s Costa Blanca and Costa del Sol, Portugal’s Cascais and Algarve or France’s Côte d’Azur. According to Agnes Marciniak Kostrzewa, a real estate agent from Marbella, landlords there can expect a 5-7% return on investment. – Property owners on the Portuguese coast are also likely to make a similar profit, says Joanna Czapska, who lives in Portugal. A big plus for this type of investment, moreover, is the earnings in euros.
On the other hand Dubai is a good investment destination outside Europe. Local agent Monika Pawłowska-Lukasz cites, as its plus points, the absence of taxes and the attractive rate of return, which can go from 5.5% to as much as 18% in the case of short-term rentals.
Let’s move on to the next reason for interest in property abroad, namely the search for a second home in an attractive location. Here, it is worth noting that the pandemic has caused a change in the priorities of Polish investors: nowadays, investments are supposed to bring a financial return, but also have the added value of being able to enjoy a home in a warmer country. It is also not insignificant here that more and more companies are moving to a hybrid or remote mode of working, making it possible to work from any corner of the world all the time or at least for a few months. Destinations such as Cyprus (according to Eurostat, 22.42% of its population are foreigners) or Spain (15.22%) are of great interest to expats. In the latter, moreover, we find coastal destinations with an even higher proportion of expats, such as Benidorm on the Costa Blanca or Marbella on the Costa del Sol, both with around 33% (INE/’21 data). Outside of Europe, foreigners are heading to Dubai, among others, where they account for as much as 91.9%, according to the Dubai Statistics Center.
Overall, in the annual ranking of the best places for expats to live, ‘Expat Insider 21’, conducted by the organisation InterNations, two popular European investment destinations, Portugal (4th place) and Spain (5th place), came out on top. The position of both countries is due, among other things, to their temperate climate and the large range of options when it comes to leisure activities. Portugal, on the other hand, is slightly more affordable in all aspects, such as housing, food and leisure costs. When looking for a place for a second home, Polish investors are guided by criteria such as convenient international connections, moderate year-round climate, ample sunshine conducive to a good mood, picturesque terrain, the presence of international schools or a high level of health and safety services.
Let’s move on to the third reason, the contingency plan. The search for property in case of political instability in the country is a new trend that emerged this year, following Russia’s attack on Ukraine. Experts from the Polish Agents Around The World club, for example, observed an increased interest in foreign properties in late April and early May.
As a location for a ‘plan B’, investors are considering countries they think of as relatively safe, away from our region of Europe, such as Portugal, Spain or Italy.
Taking all this into account, where are Poles most likely to invest in property abroad? Spain is definitely in first place on the podium. Other popular countries among compatriots are Portugal, Italy, France, Cyprus, and, outside Europe, Dubai and recently fashionable exotic destinations such as the Cape Verde Islands. Together with experts from Polish Agents Around The World, let’s take a look at a few prestigious destinations and see what awaits potential investors there.
