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“People want to live here because there is work here”

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Janusz Stolarczyk, circa 1989.

Janusz Stolarczyk in 2004.

Dom Development is building houses in Warsaw for Poland’s new middle class

Janusz Stolarczyk, Rafal Wegrzyniak and Andrzej Halicki, Polish property developers, speak with EBRD press officer Axel Reiserer in Warsaw.

Amidst the glittering facades of Warsaw´s new skyscrapers, it is tempting to forget the many problems that still exist in the shadow of these splendid symbols of the new Poland. More than 1 million Polish families still do not have their own homes – they live with their extended families or in communal flats – and the vast majority still rent, says Janusz Stolarczyk, general manager of Dom Development.

So it is no surprise that demand for housing is growing throughout Poland, especially in the capital. And this in theory should be a boon for development companies. But in practice it has not been easy to meet the demand.

Janusz Stolarczyk looks back: “In 1989 I was a board member of one of the big building cooperatives which, under communism, provided 95 per cent of all flats in Warsaw.” The cooperative developed the properties and sold them at prices which of course, under the communist system, had little to do with their real value. “We were not exactly selling flats during that period, but our clients eventually obtained them after long waiting periods.” Inevitably, the failure of the command economy to meet the huge demand created a black market in which people were selling their flats for two or three times the price charged by the cooperatives.

Under communism the quality of housing was a luxury rather than a major consideration for developers and for clients. All over central and eastern Europe thousands of faceless multi-floor apartment buildings made of concrete panels sprang up like mushrooms during the 1950s and still shape the skyline in ex-communist countries. After the enormous damage of World War II the need for housing was so great that often people moved into flats before construction was even finished. Uncovered pipes and electricity conductors, broken lifts, leaky windows and many other shortcomings were constant features of life under communism.

Another factor that has strongly contributed to the massive demand for housing in the big cities is the ongoing migration from the countryside to the urban areas. “People want to live here because there is work here,” Stolarczyk says of Warsaw. While the rest of Poland suffers from an unemployment rate of some 20 per cent, in Warsaw there is almost full employment. Guest workers are brought in from Ukraine, Belarus and Moldova to work on the capital’s building sites.

The population influx into Warsaw should be good news for developers such as Dom. But it also means that in many respects the city is stretched beyond its capacities. The development of new housing sites is constrained by the limited availability of public transport. The first underground line along the north-south artery, opened in 1995 and currently 16 kilometres, brought only limited relief. Individual car ownership is growing as a result: last year alone 300,000 cars were newly registered in Warsaw.

The biggest challenge for Dom has been to change peoples’ attitudes, says Stolarczyk. “To buy a flat or a house is the biggest investment in the lifetime for the majority of our people. Fifteen years ago people did not make far-reaching plans, they were worrying to make ends meet from one month to another.”

Another major problem was the fact that mortgage finance was almost completely unknown in the communist economy. Where there are no owners, there is nothing to mortgage. Custumers had to be convinced they could safely invest their future earnings in mortgages on houses built by trustworthy and reliable companies. In the beginning of the free market-era this was not always the case. But today the property market in Warsaw is stable, says Andrzej Halicki, PR director for the Polish Developers’ Council. “The weak companies have collapsed.” Adds Stolarczyk: “It is an indication of how much the situation has improved that people are starting to plan for the future. Our credibility is a guarantee that the risk is limited.”

Dom Development, established in 1996/97, is one of the biggest players among approximately 200 competitors in the market. The company targets small families (two adults, one child) and is currently working on several developments. The most popular flats on offer are 50 square metres in size, each with two bedrooms, a kitchen and a bathroom. “It is a compromise between the affordable and the desired,” says Stolarczyk. Depending on location, prices vary between PLN2,800 and PLN4,500 per square metre. The average mortgage instalment roughly equals the average rent in Warsaw, at PLN1,000 per month.

The first step for Dom was to convince land owners and banks to trust the company. Having the EBRD on board as an investor gave confidence to the market: “Only with a big bank like the EBRD we could grow and take on bigger projects,” says Stolraczyk. “The EBRD has a very good reputation and its participation is warmly received in our country,” adds Halicki.

Every year the company provides the market with more than 1,000 apartments and houses. In 2003 there was a massive increase in sales to people who feared that Poland’s accession to the European Union in May 2004 would cause prices to skyrocket. As a result the market was “almost flat in the early months of 2004, but now we have re-established our usual selling rate,” explains Stolarczyk.

Someone who has benefited doubly from the improvement in Warsaw’s housing market is Rafal Wegrzyniak. Dom has given him a job (he is marketing director) and a house: “I was still at school when communist rule ended. But life is much better now. I have a wife, a house, and a car. Life is easier, but competition is more intense.”

Janusz Stolarczyk adds: “For active people it’s much easier. But for older people, who can afford only little, life is much worse.” At which point Andrzej Halicki intervenes: “You know us Polish people. We always have to complain about something before we can acknowledge that it is actually not so bad.”

5 November 2004