Fall 2013, Vol. 38, No. 2

Abstract: A combination of political, cultural and economic factors contributed to the favorable performance of Poland’s housing and capital markets over the past couple of decades. Study of the returns accruing to participants in those markets, and of the behavior of those markets relative to their international counterparts, is important not only to the investor, but to the policymaker as well. No circulating study, however, examines the relationship between those markets in Poland, or between the Polish and United States real estate markets. This article provides such research. The authors gathered a residential real estate data set in Warsaw, compare it to U.S. housing indices, and also contrast the Warsaw real estate data with the Polish and U.S. stock markets. The data show a low correlation between the real estate and the stock markets in Poland. The research also indicates that positive returns in the Warsaw Stock Exchange index are precursors to favorable returns in the Warsaw real estate market. Low (or modestly negative) correlations between Polish real estate values and rental rates, and capital markets in the U.S., suggest some modest diversification benefit for the risk-averse U.S. investor buying Polish real estate or the Polish property owner investing in the U.S. stock market.