Joanna Mroczek, head of research & marketing at CBRE Poland, examines how the change of government in Poland may affect the country’s real estate sector and international investors.

Joanna Mroczek, head of research & marketing at CBRE Poland, examines how the change of government in Poland may affect the country’s real estate sector and international investors.

The year 2015 has seen extensive political change in Poland. As a consequence of the presidential as well as parliamentary elections, the liberal Platforma Obywatelska (PO), which had been in power for two terms, was forced to go into opposition and give up its reign in favour of the conservative and nationalist Prawo i SprawiedliwoϾ (PiS), which won an absolute parliamentary majority as well as the presidential seat.

As is the case under all new circumstances, change means a certain degree of uncertainty and no one is really able to forecast how particular actions will affect investor behaviour and the overall market situation. Undoubtedly, however, Poland is functioning within a European Union framework. Irrespective of the changes in terms of the alignment of political forces, it is thus provided with a large degree of stability, which is what counts most from an economic point of view. At the moment, the mood amongst investors and financial institutions seems to be relatively positive.

The new leadership is not announcing any drastic changes in respect of either pro-investment or financial policies, although it looks like domestic businesses can indeed expect greater support than foreign ones. In terms of changes which may affect the property market, the following measures have been proposed:

New ministries
Changes within ministries – establishment of new ministries (the Ministry of Development) and abolishment of certain existing ones (the Ministry of Treasury). It is possible that this will translate into changes in the current strategy implemented by companies owned by the State Treasury and in relation to owned and leased properties as well as any investments. Many projects will now without doubt be suspended or even entirely abandoned.

New financial tax
New tax imposed on financial institutions amounting to 0.14% of the value of the majority of transactions and 0.7% on derivatives. The new tax could potentially lead to an increase in prices of banking and financial services and subsequently curtail growth within this sector.

Shopping centre tax
Tax on large-format shopping facilities, i.e. from 250 m2 upwards (between 0.5 and 2% on turnover, depending on the volume of turnover). There will be an exemption from the tax for shops whose turnover volume does not exceed PLN 700,000 per annum. The new tax could potentially represent the most significant interference with the free market and adversely affect the growth process for supermarkets, suppliers and customers. However, an increase in prices for grocery products is not in line with the promises made by the new governing party during the campaign, and thus introduction of this particular tax is not yet definite.

Ban on Sunday trading
As proven by the example of other countries, this kind of decision usually leads to a change in shopping habits, which does not necessarily mean a decrease in a shop’s turnover. However, an exception here would be the shopping centres and shops located near the country’s border which are currently benefiting from the ban on weekend trading in force in Germany.

The remaining proposals refer to a large extent to social and political issues and should not therefore greatly affect the Polish economy for which the growth forecasts remain relatively positive. The above changes will also be very much dependant on the format in which they are introduced and will not necessarily have a negative effect in the long term.

Other proposed improvements which could be put on the agenda regarding the planned actions of the new authorities include:

Job creation plans
Strategic approach to the system of support for investors creating new jobs, both in terms of foreign and domestic businesses, which would improve Poland’s competitiveness in the entire Central Europe region.

Investment procedures
Simple and transparent rules for investment procedures such as obtaining building permits and faster creation of local zoning plans.

Urban planning
Greater decisiveness and collaboration amongst town/city authorities regarding the process of urban space development, planning and management.

Public-sector freedom
Greater freedom for public-sector entities in respect of taking decisions relating to management of their own properties and flexibility regarding their location.

Modifications are without doubt needed and expected in respect of legislation and management in many areas of the country’s economy. This is really why so many changes have been brought about as the result of the parliamentary elections.

Positive expectations are connected with Mateusz Morawiecki, the minister of the new Development Resort in the new government. His long-term experience in the banking sector is widely recognised by Polish business. It bodes well for improvements in Poland’s competitiveness, but also for stability in public finances and control of the excessive spending promised by PiS, which is the major risk and concern for the markets.

Irrespective of which way the situation progresses, a close eye has to be kept on all the steps and actions taken by the new government, and any changes which could in any way stunt the growth of the property market will have to be opposed through close collaboration with the relevant industsry organisations.

Joanna Mroczek
Head of Research & Marketing,
CBRE Poland