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Warsaw real estate market deep dive - Q2 2025

Warsaw real estate prices increased by 57% in the last 5 years (source). Is it a bubble?

Chart source: Sonarhome
Most likely not - as the housing boom was driven by fundamental factors and not over-leveraging. Data used below measures changes between Jan 1 2020 to Jan 1 2025.

Wealth increase

  • 15% GDP growth during period (surpassing Portugal in PPP per capita terms)
  • 59% increase in average wages across the country and likely higher in Warsaw.
  • Warsaw's purchasing power is now 6% above EU average
  • Average wages increased at a higher rate vs real estate prices, Measured in local income terms - real estate became more affordable

Population increase

  • 13% increase in Warsaw’s population
  • Urbanization - Poles from smaller cities moving to the capital city
  • Return migration - Poles from countries like the UK moving back
  • New migrants - primarily from Ukraine and Belarus, but increasingly from other countries as well

Government backed mortgages

  • During the second part of 2023, the government briefly launched a government backed loan program. Eligible borrowers were able to obtain mortgage loans with rates at 2%.

No signs of over leveraging and over valuation

  • Poland is one of the least leveraged markets globally, with the majority of real estate transactions still taking place without mortgage loans.
  • Low leverage means that Polish real estate prices are much less sensitive to global market and rate changes, offering investors a less correlated asset to global equities and developed market real estate.
  • The above is proven by the fact that real estate prices grew at a time when mortgage rates spiked to 8%
  • Warsaw real estate is still priced 30% below Prague, Czech Republic. This is despite the average spending power of locals in Warsaw being stronger (€19,878 in Warsaw vs €18,667 in Prague).
  • Foreigner buyers make up less than 6% of total Polish real estate transactions in 2023 - much lower than Portugal (12%) and Spain (15%) - thus better insulating Warsaw real estate prices from external factors.
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Driving factors for further increase in real estate prices

1. Continued population growth and economic growth

  • Continued population increase from return migration of Poles in the West, as well as external migrants (both EU and non EU)
  • Continued economic and salary growth above the EU and US average (see table below)
  • More insulated from US tariffs than the rest of the EU (Source: ING bank) with only 3.3% of Polish exports going to the US
  • Real estate continuing to act as the preferred investment vehicle of most Poles, thus capturing the country’s wealth increase (see chart below)

2. Significant rate cuts and possible government subsidies

  • Rates are expected to drop dramatically over the coming 18 months from 5.75% to ~3.5%. This will significantly improve mortgage affordability, boost lending and likely lead to higher prices. (Source: Bloomberg, ING)
  • The government is working on new subsidized loans program designed to subsidize housing purchases for young people and families.

3. Fundamental housing shortage

  • Significant housing deficit in Poland estimated at 1.5 to 3 million units (Source: WBJ, PWC, C&W). Unlike other markets - there is no over building in Poland.
  • Looking specifically at the student housing segment in Warsaw, there is a deficit of 60,000 beds (Source: JLL) supported by the continuous increase of international students - many of whom stay in Poland post graduation.
  • This especially opens up room for investors looking to rent to university students and young professionals at the start of their career.

De-dollarization hedge

  • If you are a USD denominated investor looking for an asset not correlated with the USD, the Polish Zloty (PLN) trades closely with EUR - thus allows you to track EUR’s upside, whilst earning a higher yield. (Purple line: USD/EUR, Blue line: USD/PLN since 2004)
  • During times of extreme USD weakness, such as the 2008 financial crisis - the Polish Zloty traded 46% stronger than USD. Therefore Polish Zloty denominated real estate offers a USD denominated investor significant upside in the event of a continuous decrease in USD value.

Summary

  • The exceptional price growth in the last 5 years was driven by fundamental factors. Measured in terms of local purchasing power - real estate in Warsaw became cheaper, not more expensive.
  • If you believe in the Polish growth story continuing, real estate in the capital city remains a good investment vehicle to capture this growth. This is supported by fundamentals such as Warsaw’s population growth, housing deficit and interest rate cuts.
  • Assuming an annual appreciation of 5%, it would still take 5 years of compounded increases for Warsaw’s median real estate price to reach Prague’s current prices (despite Warsaw being wealthier in purchasing power terms).
  • Targeting 5% appreciation + 5% net rental yield appears realistic over the next 5 years (28% compounded total appreciation). Real estate can also be sold free of any capital gains tax in Poland after 5 years.
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This report was originally published in May 2025.
2025-05-01 14:53 Investment