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Luxury premium properties. A market that is doing increasingly well in Poland.

REAL ESTATELuxury premium properties. A market that is doing increasingly well in Poland.

In the sphere of Polish luxury, the number of exclusive addresses is growing rapidly. These addresses are often regarded as a crisis-resistant ‘machine’ for capital multiplication, and a symbol of status, high quality, and good taste. In light of this, we have decided to assess the reality behind these promotional slogans by analyzing market data and accompanying trends.

Indeed, the Polish luxury goods market, which has seen a profound transformation over the past three decades, is looking increasingly robust. According to a KPMG report, the total market value increased by nearly 19% in 2022, reaching PLN 37 billion. Over the same period, the premium real estate market alone grew by 9%, amounting to an absolute value of PLN 2.8 billion. Experts estimate that premium apartment transactions alone account for approximately 1% of all operations in the residential real estate market in the country’s largest cities.

The premium segment includes designer apartment buildings with penthouses in prestigious locations, revitalized tenement houses with views on famous landmarks, beachfront villas, manor houses with adjoining parks, modern residences by the lake, and boutique lofts with swimming pools and spas. Each country’s luxury real estate has its unique characteristics and individual flair. While certain global trends can be observed everywhere, they predominantly adhere to local rules in most cases.

In Poland, this segment is still in a relatively early stage of development, and compared to Western Europe, it has relatively low prices and a still small number of truly luxurious properties. Yet for many years, it has been recording consistent dynamic growth, and according to some forecasts, will exceed PLN 4 billion in value in 2023. Significantly, demand for luxury residential properties in our country is growing, and it is still not easy to find a good premium offer, therefore the market has excellent prospects for development.

Generally, those who operate in the premium market are the wealthiest who pay cash for luxury – business people, owners and CEOs of international companies, successful artists, athletes, actors, celebrities, lawyers, doctors, and politicians. The appearance of luxury projects in the offer is usually linked to the stage of the development of the housing market, local demand, and the attractiveness of a particular location. Since the number of wealthy and affluent people in Poland is increasing, so is the number of potential buyers of luxury real estate, treating them as a sign of prestige and investment.

As the KPMG report indicates, an increasing number of people can afford to purchase them each year. In addition to rising earnings, there is also an increase in Poles’ wealth. In 2021, over 100,000 people had net assets of over a million dollars. This is a 9.7% increase from the previous year. The number of wealthy, affluent, and very affluent people also increased. Over 320,000 people earned a gross income of more than PLN 20,000 per month – 12.8% more than in the previous year, with a total income of PLN 220 billion. The number of affluent people in Poland in 2021 was almost 83,000, an increase of 7.4% year on year, with their total income increasing by 5.4% to PLN 130 billion. The group of very affluent people grew by 4.8% to 37,000, and their earnings were 2.6% higher than in 2020, reaching PLN 94 billion. The highest number of very affluent Poles resides in the Mazowieckie, Wielkopolskie and Silesian voivodeships.

Interestingly, demographic statistics are often completely overlooked, but they are a significant factor that influences the types of housing that will be attractive in the future. It is easy to observe the ongoing process of increasing the number of properties per capita for each successor. In 20 years, the average family’s wealth will grow to over PLN 860,000. The shrinking of the Polish population will cause a property revolution to start within the next decade. Poles will start to become rapidly affluent, and inheritances left by our relatives will be up to three times larger than today – according to a report prepared by Polityka Insight and BZ WBK. Increasing affluence will cause a significant change in preferences regarding the standard and location of successors’ residences. One could say that today’s premium segment will become the standard. Importantly, on the world’s major markets, Generation Y, also known as millennials – i.e., people born between 1980 and 2000, is becoming the key group of customers buying premium properties. Increasing demand from their side is changing the definition of luxury, forcing developers to tailor their projects to new trends.

In Poland, the premium market still constitutes a small percentage of all properties, hence it is relatively difficult to precisely estimate and analyze. Moreover, for years developers of the popular segment and new legal regulations have been raising the bar, mandating the construction of increasingly functional, high-quality estates and houses. In the past, an elevator with mirrors, an underground garage, a gym, or a reception at the building entrance were considered extravagant, while today they are basic standards. Many properties costing even millions of zlotys, categorized as luxury only a few years ago, are now classified as ordinary because they do not meet current expectations.

With the growing number of affluent people, opportunities for travel and remote work, and therefore also the purchase of premises abroad, the development of technology and environmental awareness, buyer’s requirements and expectations change. Once exclusive apartments and top-shelf homes had to signify opulence besides an expensive address, now the popular “quiet luxury” trend worldwide – focusing on well-thought-out, mature, and timeless solutions – reigns supreme. Hence, there has been a discussion for some time now about what premium segment real estate really is, which even gained nicknames “super” or “ultra” for differentiation.

Today, a several-meter-high crystal chandelier coming out of a ceiling illuminated by natural light that enters the interior through an imposing skylight – extending around designer spiral stairs, an Olympic swimming pool with a fitness center and a view of the city center, a view of Wawel, a beach, or a golf simulator, are just some of the inventive attractions of luxury buildings that cost a dizzying amount of money. The norm includes features such as the highest standard of architecture and high-quality finish combined with the use of rare materials, attention to detail, and the use of elements of art known as “jewelry of the object”, a high level of comfort offered – the so-called 15-minute cities, modern technology, and innovative solutions caring for safety and privacy as well as additional common conveniences – such as a relaxation area, swimming pool, squash courts, private garden, cinema room, or a wine cellar, etc. While an attractive unique and preferably historical location – not necessarily already in the city center – remains the most important factor, future investors, analyzing offers, look comprehensively much wider than just the building itself.

Investment in luxury naturally requires large amounts of money, hence it may be surprising that customers in the premium market are not only the richest, but also people relying on credit. However, the vast majority of transactions are cash ones. This causes this segment not to be strongly dependent on the current economic situation related to credit availability. Let’s remember also that top-tier real estate is often bought for snobbish motives or to underline a possessed wealth status, and many investors become “collectors of addresses”.

In this situation, it is not surprising that the number of development companies that persist in implementing such investments is also growing. Many of them have already built a strong local position and plan to continue to consolidate it, while others are just starting, based on international experience. Given that the biggest group of investors is still predominantly in a few metropolises, it is most competitive there. For example, just in the Warsaw market, several large luxury investments will start soon – including several that are super premium. Meanwhile, premium properties are being built full steam ahead in the Tri-City, although oversaturation has been noticeable there for some time.

Developers also discovered a demand niche in smaller voivodeship cities and resorts. Altogether, in Warsaw, Kraków, Wrocław, the Tri-City, Poznań, and Łódź, the apartment segment offer at the end of the second quarter of last year amounted to over 3 thousand. Currently, in our country, you have to pay an average of PLN 30,000 to 60,000 per square meter for such an apartment. However, there are investments where the price exceeds even PLN 100,000. The largest offer and highest prices belong to Warsaw, followed by the Tri-City.

The way premium properties are bought is also changing – availability on popular internet platforms is limited, which is aimed to add uniqueness. The main reasons for hiding their prices include exclusivity and the perception of luxury. The lack of value presentation in online residential offers, and presenting it only upon the client’s request, is a global trend known for exclusive brands. Hiding costs means that the products are generally intended only for “a chosen few”. After all, the idea of premium brands is that those who buy them have enough money and buy items because they like them, thus the price should not influence the purchase decision. Therefore, everything that should matter when buying such a product is quality, craftsmanship, reputation, lifestyle, and the history behind it. Moreover, there is an off-market segment where hidden gems are hidden – properties only available to selected clients, not on official platforms, emphasizing privacy and the exclusivity of the offer.

It is often heard that the purchase of luxury properties is one of the surest capital placements, effectively protecting money from loss of value in times of crisis. Inflation is a loss of purchasing power of money, so to properly assess the true profitability of this type of investment, one must check how their “real” prices have changed, i.e., those corrected for inflation and showing us “clean” profit. However, it is worth remembering that all real estate investments – including the premium segment, to be profitable, must meet certain conditions. Unfortunately, in the face of a difficult economic situation, numerous examples from abroad have shown that the premium real estate sector also reacts to crises and sometimes even loses value faster than the ordinary one. Well-situated people often know better when the situation will worsen and react faster, and having many such real estate properties in their portfolio – they may want to reduce it sometimes to, e.g., raise free capital for another kind of investment.

On the other hand, the development industry is very capital and energy-intensive, and the final price of a luxury apartment is a composition of many factors including, but not limited to, inflation-related sudden increases in construction material prices, rising financing costs, higher marketing and sales expenses, and most importantly, decreasing land supply for investments of appropriate standard. Therefore, when choosing an expensive apartment for investment, it is best to guide yourself by hard economic calculus and realities. No premium apartment is a “golden goose” or a machine for making profit.

It is worth adding that the Polish luxury real estate market is slowly starting to understand that the next generations of clients prefer experiences rather than material goods. As a result, they expect projects that provide not only an “exclusive roof over their head”, but also communities of like-minded people with whom they can identify and share these experiences. Incorporating these social areas has become an important attraction factor for buyers who are looking for a comprehensive and full-experience lifestyle. Importantly, sustainable materials, smart technologies, and luxury amenities are becoming the basis for the development of this segment, which is tantamount to increasing the emotional satisfaction of buyers.

Adam Białas – is an economic expert, a specialist in real estate and the premium market, a manager at the “Bialas Consulting & Solutions” agency and a business journalist.

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