Time to Invest in Polish Real Estate?

DISCLAIMER: I am probably the last person you should listen to for advice about major investments. Please do lots and lots of your own research before buying anything big. Please take this post in the entertaining thought experiment style it is intended.

I’d like to start with an interesting story about Poland’s most famous daughter, Marie Curie, and her family:

1927 Solvay Conference. Marie is in the first row, between M. Planck and H. A. Lorentz

Marie was born in 1867 in what was then the Russian part of partitioned Poland. (Russia, Prussia, and Austria had carved up Poland into pieces back in the 1700s.) Her mother, father and grandfather were teachers–unsurprisingly, her father taught math and science. When the Russians decided to shut down science laboratories in Polish highschools, her father simply brought all of his equipment home and taught his kids how to use it instead.

Because of the Russian occupation and interference in the local schools, the Poles began operating their own, underground university known as the Flying University (there’s a name for you). As a woman, Marie couldn’t attend the official colleges in Warsaw, but was accepted to Flying U.

Marie’s sister wanted to study medicine in Paris, but unfortunately their parents and grandparents had lost all their money supporting Polish nationalist uprisings, and the girls were left to support themselves. So Marie and her sister had an agreement: Marie would work and send money to Paris while her sister studied, and then her sister would work and send Marie money while she finished her education.

Marie went to work as a governess for some distant relatives, and fell in love with one of the young men of the family, Kazimierz Żorawski, future mathematician. Unfortunately for the starry-eyed couple, his parents rejected the match on the grounds that Marie was penniless.

Żorawski went on to become a professor of mathematics at Krakow University and later Warsaw Polytecnic. Marie went to Paris, married Pierre Curie, won two Nobel prizes, and founded the Radium Institute at Warsaw Polytecnic. A statue of Marie was erected here, and as an old man, Żorawski would come and sit before the image of his young love.

You didn't seriously think we'd make it through this post without a polandball comic, did you?Poland has had a rough couple of centuries. According to Wikipedia:

An unsuccessful attempt at defending Poland’s sovereignty took place in 1794 during the Kościuszko Uprising, where a popular and distinguished general Tadeusz Kosciuszko, who had several years earlier served under Washington in the American Revolutionary War, led Polish insurrectionists against numerically superior Russian forces. Despite the victory at the Battle of Racławice, his ultimate defeat ended Poland’s independent existence for 123 years.[57]

Poland was unfortunately situated for both WWI and WWII, losing 1/5th of its population in the latter. The aftermath–occupation by the Soviets–wasn’t much better, as Ian Frazier recounts in his book, Travels in Siberia:

As Russia retook Poland, many Poles once again wound up in the gulag. Some who had lived through the Nazi occupation said Hitler was nothing compared to this, and they now wished they had fought on Hitler’s side. A prisoner who had survived Dachau hanged himself when he was shipped to Kolyma. Gulag prisoners who knew the novel Uncle Tom’s Cabin regretted that fate had put them in thsi time and place, and not in slavery in the American South, a hundred years before. As Negro slaves, they reasoned, at least they would have lived someplace warm, and would have been whipped and branded but not worked to death outright. In 1945, news reached the camps that the United States now possessed the atomic bomb. According to Solzhenitsyn, this unexpected development gave hope to many prisoners, who began to pray for atomic war.

But despite all of these troubles, Poland remains one of the world’s better countries–it’s ranked 36th out of 188 nations on the Human Development Index, and has an average IQ of 99, the same as its neighbors, Germany and Finland.

Despite this, Poland is ranked only 68th in per capita GDP ($27,700, lower than Puerto Rico, which isn’t even a country,) and has had a net negative migration rate (that is, more people have left than arrived) for most of the past 60 years. (Poland lost a net of almost 74,000 in 2015, most of them to other EU countries.)

In sum, Poland is a country with high human capital whose economy was probably artificially depressed by Communism, but has been steadily improving since 1990.

Net immigration increases the number of people in a country*, putting pressure on the local housing market and raising land prices. Net emigration decreases pressure on housing, leading to lower prices.

*Assuming, of course, that fertility rates are not collapsing. Poland’s fertility rate is slightly lower than Japan’s.

Poles have emigrated to countries like Germany and the UK because of their stronger economies, but if Poland’s economy continues to improve relative to the rest of Europe, Brexit goes forward, etc., Poland may become a more attractive employment destination, attracting back its migrant diaspora.

All of which leads me to suspect that Polish land is probably undervalued relative to places with similar long-term potential.

 

7 thoughts on “Time to Invest in Polish Real Estate?

  1. I’ve mentioned Poland as an exit destination in conversation – it’s probably the closest my family has to an ancestral homeland – but it’s not a good bet. Russia and Germany are likely to go Muslim, and are right next door with histories of aggression (even without Islam). It’s fertility rates have been terrible for a while, and whatever youth there was has fled. There’s plenty of Polish stock on the West, but the actual Polish geography reminds me of Southeastern Europe, emptied of its lifeblood, waiting for colonization.

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  2. The Poles are currently headed by a right government that has establishment parts of the EU freaking out about, so I don’t think they’ll go insane like Germany in the near term.

    Somewhat related the Poles before they were partitioned, had one of the most “democratic/republican” states in Europe, resembling a modern day presidential government. The PLC elected their king with all nobles getting a vote, with a legislature also elected by the nobility, it may not sound like much but in the golden era of the Polish Lithuanian Commonwealth 10% of the population with nobles, which compareble with the early United States. Sadly a legislative veto wrecked it, the Liberium Veto was the right of any participant to veto any piece of legislation and even a sitting of the sejm (legislature). Basically selfish and corrupt use of the Liberium Veto made the PLC’s government ungovernable either due to selfish reasons or because of bribery by foreign powers.

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  3. (1) Maria Skłodowska-Curie. This is how she was signing herself at the end, including the second Noble price.

    (2) We had housing bubble as elsewhere, but the prices had not fallen as sharply, and in fact had stagnated for several years.

    (3) Because of demographic situation, I would say that the outlook for my country is not pink. I really wish UK would become racist country which would deport all the Poles back to Poland – we will desperately need them within next few decades, and without them, Polish economy may suffer crash.

    In addition, the current government, nationalist and socially conservative, is actually socialist in economy matters.

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    • I might be a few decades early in predicting the bottom out on the Polish land market, but I do think the population will eventually stabilize (one way or another, population will eventually stabilize or reverse in all countries…) Recent events in Manchester make Poland look even better.

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