How will Doubling the Minimum Wage affect Polish Property

Team BigDoor24 - Wednesday, September 11, 2019 Tags: Buy General Information Investment Let News Polish Mortgage Rent Sell

Up or Down?

The Government announced plans this week to double the Polish minimum wage over the next 4 years (Bloomberg), should they be re-elected. What effect will this have on future Polish property prices?

Arguments about the validity and effect of minimum wages are notoriously under researched and the effect on property even more so. We can't definitively say what the future will bring but we can suggest particular areas to watch out for.

More cash, more splash

All things being equal - supply , demand, economic growth and employment levels - any increase in disposable income will automatically lead to an increase in property prices and rents demanded. Added to the fact that Poland already has lower than EU average levels of mortgages, a singular view should see Polish property growth to seriously move up in the next 4 years and beyond.

Inflation

Any increase in disposable income in the general population normally leads to an increase in inflation. Central banks don't like too much inflation which may lead to an increase in polish mortgage interest rates, dampening peoples ability to spend. Any increase in the cost of borrowing would generally have a negative effect on property. If the low levels of polish mortgages continue this may not have as large an effect as it might.

Over time, property is considered a good hedge (safeguard) against rising inflation so an investor may be happy to ride out any slowdowns.

Employment

One of the main arguments made against minimum wages is the effect on employment. The claim is made that by making staff more expensive, employers will hire less and this will also lead to a drop in new businesses opening. The nuance here is that it really depends on what the minimum wage is. There is no doubt that a doubling of the current rate would have a dramatic effect and should it lead to large scale unemployment then a serious drop in property values would be expected.

The BigDoor24 Team view

It is a big gamble and the strength of the economy probably gives them confidence of it's positive effects but assuming it actually happens we would suggest that generally it should be Property Positive. We would add that this approach is an indication of a wider vision, right or wrong, of a future strong Polish economy.

We believe increasing polish mortgage levels will have a much more upward effect on rising prices than minimum wages and we don't see any reason for a serious slowdown in the near future.

But hey, don't take our word for it and do your own research, it's a choppy world out there!

Team BigDoor24

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