Interest rate cuts fuel real estate investment in Europe – What about Poland?

While Europe sees a resurgence in real estate investment following interest rate cuts by the European Central Bank (ECB), Poland’s property market remains stagnant. Despite rising apartment prices in Poland’s largest cities, transaction volumes have dropped, leading to questions about whether Poland will follow Europe’s trend.

“The slowdown in Poland’s real estate market is largely tied to uncertainty around loans. Real estate investment relies heavily on trust, and lower interest rates generally spur more investment,” said Radosław Jodko, an investment expert at RRJ Group.

Currently, Poland’s Monetary Policy Council has not initiated interest rate cuts, with the market predicting reductions only in 2025. Meanwhile, the ECB and the U.S. Federal Reserve have both started lowering rates, moves that could have an indirect impact on Poland’s financial markets.

Lower U.S. Interest Rates and Poland

Jodko suggests that declining interest rates in the U.S. could influence Poland, despite some arguing otherwise. “When U.S. rates drop, capital often flows into emerging and developed markets like Poland. Initially, this might benefit the stock market, but I wouldn’t be surprised if we start seeing increased interest in Poland’s real estate sector as well,” he explained.

He also pointed to another potential consequence of U.S. rate cuts. “If the Fed continues its aggressive path, it might force Poland to cut rates too, especially if the dollar weakens significantly. We haven’t seen it yet, but we’re still early in the U.S. rate-cutting cycle,” Jodko added.

Rising Property Prices in Europe

In contrast, Europe is already seeing the effects of interest rate cuts. Real estate prices, which had slumped following market instability since 2022, are beginning to climb again. Lower borrowing costs have renewed investor interest, particularly in residential and logistical properties.

“The ECB’s rate cuts are leading to rising property prices across Europe. Lower rates make loans cheaper, increasing demand. Real estate is capital-intensive, so reducing loan costs eases pressure on investors,” said Jodko.

Recent data from BNP Paribas REIM confirms this trend. As investment picks up across Europe, real estate prices are rising, and capitalization rates are falling. Analysts expect these trends to continue as the ECB is projected to make further cuts until the end of 2025.

Poland’s Outlook

Despite the current stagnation, Jodko remains optimistic that Poland’s real estate market could benefit from global trends. “Poland might not be feeling the effects of interest rate cuts yet, but we could see a shift, especially if foreign capital starts flowing in,” he said.

For now, residential real estate remains the most attractive sector in Europe, with high demand driving up prices in countries like Spain. Industrial and logistics properties are also maintaining strong investment momentum, with global investment in these segments reaching EUR 70 billion in the first half of 2024—a 9% increase over the pre-pandemic average.

Poland’s property market may be facing challenges, but with interest rate cuts on the horizon and growing investor interest, the potential for a rebound remains. Investors are keeping a close eye on developments in the U.S. and Europe, waiting to see how global monetary policies will shape Poland’s real estate landscape in the coming years.

Author: Radosław Jodko, investment expert at RRJ Group