Polish property investment

I am considering investing in Polish property. Poznan seems interesting but i think i'm vearing slightly towards Wroclaw. As has been stated before it is currently one of the strongest contenders to become Ryanair's regional hub in central europe.

http://www.warsaw-life.com/news/news/318-Ryanair_Eyes_Polish_Airports

Having said that it is only one of a number of factors that have to be carefully considered before purchasing and admittedly I am a relative novice in terms of the Polish property market. My research so far has been confined to sifting through the plethora of websites out there trying to seperate fact from fiction. But i would like to arm myself with as much info as possible before hopefully taking a trip out there within a couple of months time.

I am a newbie member to this site but have been reading the threads for quite a while and really enjoy and appreciate the honest and lively debates that are thrown up. Any advice on purchasing property in Poland would be greatly appreciated! Is Warsaw becomming overhyped? would one be best advised to look at other cities like Wroclaw, Poznan, Krakow, Lodz or Tricity?

thanking you for any help

My order of preference after Warsaw.

Wroclaw , Lodz , Poznan

Warsaw has moved a lot already whereas these other cities havent so much. Definetly better yields outside warsaw.

www.oferty.net

Thanks for the advice ecstatic.

By the way the current rate of VAT in Poland when purchasing a new property is 7%. By new they mean upto 5 years old. In January 2008 there will be a change in the Polish regulations and the rate of VAT will increase from 7% to 22%, in line with Poland’s negotiations with the EU.

Does this simply mean that for someone who invests before Jan 2008 their Polish property will increase by 15% overnight?? Even so, this 15% is tax afterall, which an investor will never get anyway, if/when he/she decides to sell their property...

Moreover to sell under the new VAT rate of 25% an investor will have to sell their property while it is still new (i.e. under 5 years old) and this means he/she will get hit with CBT in Poland to the tune of 10% of the selling price. I guess its a catch 22 situation

Bryman said:

Thanks for the advice ecstatic.

By the way the current rate of VAT in Poland when purchasing a new property is 7%. By new they mean upto 5 years old. In January 2008 there will be a change in the Polish regulations and the rate of VAT will increase from 7% to 22%, in line with Poland’s negotiations with the EU.

Does this simply mean that for someone who invests before Jan 2008 their Polish property will increase by 15% overnight?? Even so, this 15% is tax afterall, which an investor will never get anyway, if/when he/she decides to sell their property...

Moreover to sell under the new VAT rate of 25% an investor will have to sell their property while it is still new (i.e. under 5 years old) and this means he/she will get hit with CBT in Poland to the tune of 10% of the selling price. I guess its a catch 22 situation

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Err, your logic is completely skewed.

I don't know the first thing about Polish tax laws but if you have to charge VAT at 22% (or is it 25%??) on your property when you sell it but only 7% when you buy then you will make a LOSS of 15% overnight. Properties under 5 years of age will make up a very small proportion of the total housing stock. House prices overall will not increase in price therefore when this new VAT rate is introduced, you will simply have to return a greater proportion of your sale as tax to the govt.

However what you're saying about the Polish tax situation is somewhat muddled and doesn't make a hell of a lot of sense to me. It sounds like you've got your facts wrong, or have possibly been spun a line.

Howitzer said:

Err, your logic is completely skewed.

I don't know the first thing about Polish tax laws but if you have to charge VAT at 22% (or is it 25%??) on your property when you sell it but only 7% when you buy then you will make a LOSS of 15% overnight. Properties under 5 years of age will make up a very small proportion of the total housing stock. House prices overall will not increase in price therefore when this new VAT rate is introduced, you will simply have to return a greater proportion of your sale as tax to the govt.

However what you're saying about the Polish tax situation is somewhat muddled and doesn't make a hell of a lot of sense to me. It sounds like you've got your facts wrong, or have possibly been spun a line.

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I agree that new properties under 5 years of age will make up only a very small proportion of the total Polish housing stock and therefore only a very small proportion of properties will increase in price in accordance with the VAT increase (from 7% to 22% (not 25% sorry - typo)). But am i right in saying that the purchaser, not the seller, is responsible for paying the VAT? please correct me if i am wrong

So if i were to buy now i (the purchaser) would pay 7% VAT.
If i were to sell within 5 years (unlikely if things are going well) it would be the responsibility of the new purchaser of the property to pay VAT at 22% and not myself (the seller)...
I haven't been spun a line as my research has all been independent so far. Apologies if my previous post was muddled, i'm just trying to gather all the relevant facts about Polish tax implications before i proceed. Thanks

Bryman said:

I agree that new properties under 5 years of age will make up only a very small proportion of the total Polish housing stock and therefore only a very small proportion of properties will increase in price in accordance with the VAT increase (from 7% to 22% (not 25% sorry - typo)). But am i right in saying that the purchaser, not the seller, is responsible for paying the VAT? please correct me if i am wrong

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No, the vendor pays the VAT to the govt. It becomes part of the price as far as the buyer is concerned but it would be your responsibility to pay the tax. The same as when you buy a bag of bananas. Except that you're the only one charging an extra 22% on the price of your bag of bananas whilst everyone else can sell them at the regular price.

Say one property is greater than 5 years old and so doesn't need to have VAT charged on it. And then we have your property also priced at 100K but needs to have VAT charged on top @22% = 122K. The worth of both is 100K so which would you purchase as a buyer? I hope you're going to say the older one which doesn't attract VAT. So in reality the newer one would have to have a price of about 80K in order for both to be the same price (100K).

I think you need to talk to a tax advisor. I'm not one but I can see that your numbers are wrong.

If this scenario was taking place in Ireland, both properties might go up for sale at 100k but one would include vat of 21% which the vendor would have to remit to the Revenue. The first vendor makes 100K, the second makes 100k less the VAT he has to pay to the Revenue.

Howitzer is right. Is this definitely VAT? If it's stamp duty then it's a whole different story.

Thanks howitzer and liteweight for your replys. That clarifies things for me.

I would say that there will be quite a few new builds completed before now and Jan 2008 in order for developers to sell them at the lower VAT rate. A draft has been submitted to the Polish government stating that the cost of VAT should stay at 7% if the property is below 350 M2 but this doesn't look like it is going to be approved.

Please do speak to a polish tax advisor. If the polish VAT on new property works in the same way as in Slovakia or Czech rep. (and I am pretty sure it does) then you are misunderstanding this.

Yes, all new property (up to 5 years after completion) has VAT included in its price. The VAT is not really an expense, it's part of the property value.
When you buy from a VAT registered company (eg. developer) you will pay the price incl. VAT. The developer pays the VAT to the government.
Now, when you sell this property - no matter if in a year, five, or ten - neither you or your buyer pays any VAT again!

So, let's say you bought a flat at 100k. 7% of that was VAT. You sell in a year (or any number of years) and - if there was no capital growth - get 100k from your buyer. Nobody pays VAT anymore.

That's how it definitely is in Czech rep. and Sloavakia. As I don't have any properties in Poland, I can't say with 100% certainty it's the same rules. I'd be surprised though if it worked differently there. Still, speak to a tax advisor in Poland, as anyone should when buying abroad anyway.

So, theoretically, when you sell your newish flat after the VAT rate hike, your property will be more affordable than new builds, and although I doubt you will get a buyer to pay you 15% more for it because of this, you may be able to get a little more purely due to the fact that all new flats will be suddenly 15% more expensive (unless the developers let some of this hike go from their margins which I doubt). But, all that will depend on competition in the sales market, as usual.

Vat comes in on the building materials. Its not of interest except that there will be a 15% difference between new and old and will prop up property bought prior to 21% regime

The sbpost had a good article at the weekend on those investing in Poland.(couldn't see the link online) There seems to be alot of smart money headed that way.

Thanks alot guys for all that useful info. I was searching for that link in the SBP but no joy.

Hi Bryman,
Good luck with investinig in poland, think it is a shrewd move right now.
The Vat rate will definitely move up to 22% as it is a condition set out to bring Poland in line with the rest of Europe.
Remember too that if you sell the property within 5 years of purchasinig it, you will have to pay a higher rate of tax unless the proceeds are reinvested in another polish property. Standard rate is 5% or 10% if sold within 5 years. Be aware that you will have to factor in other costs when purchasing a property like the agency fee which is charged to both seller and buyer. solicitor fees of course. A court fee for registering the property in your name, normally 2% of the sale price.
Any of the cities mentioned by ecstatic are the ones to watch while i would add Katowice too. Don't overlook the holiday resorts either though such as Sopot, karpacz, Unisla and Zakopane.
Happy Hunting!

this could be a word of warning on Polish morgtages
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Poland is in a property boom that has already started but has a long way to go. The maths are simple - Poland has a GNI per capita of $5,280 compared to $25,270 in Germany (Source: World Bank) - it's a disparity far too great to maintain. The proof can already be seen in GDP growth. In 2004 this was 4% in Poland compared to 0% (yes zero) in Germany (Source: World Bank).

Hi guys,

I have to say I know little or nothing about investing in Poland but from what I've seen Krakow seems to be mentioned quite a lot.

I was just wondering why those who seem to know the market in this thread don't seem to think that Krakow is an option.

Magnet said:

Poland is in a property boom that has already started but has a long way to go. The maths are simple - Poland has a GNI per capita of $5,280 compared to $25,270 in Germany (Source: World Bank) - it's a disparity far too great to maintain. The proof can already be seen in GDP growth. In 2004 this was 4% in Poland compared to 0% (yes zero) in Germany (Source: World Bank).

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Here's some more great stats from the Polish Central Statistics Office.

Population is projected to fall from 38 million in 2005 to 35.6 in 2030. The number of over 65s will go from 5 million in 2005 to 8.5 in 2030.

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Unemployment is currently (June 2006) 16%.

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Thanks for the advice and words of encouragement Magnet. I cant stress enough how important it is for prospective investors to do their homework before even considering investing. Afterall knowledge is power! But at the end of the day any investment, whether that be in property (home or abroad), bonds, stock or whatever, needs that little bit of luck. And i hope we all get it!

Coss i would say that Krakow is definitely an option. It is probably the best known city in Poland after Warsaw and is certainly attracting plenty of attention from property investors. While I haven't ruled out any other cities I am leaning towards Wroclaw. It is nicely sized 600,000+ population and has clearly identifiable areas as well as quite good student numbers with 10 state run universities (always a + in terms of rentability). But thats just my opinion (which can change!). I think Poland as a whole has a lot going for it, and a good probability of long term stability, which alot of the 2004 EU accession states have yet to offer.

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http://www.askaboutmoney.com/printthread.php?t=12982
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