Matthew Day in Warsaw -

It seems that if you're active on the Polish real estate market, the Warsaw Stock Exchange (WSE) is now the place to be. This year has seen a veritable flurry of property firms listing on the exchange, and with more such firms mulling an IPO, the bourse has now given them the ultimate their own index.

Called the Developers Index, it charts the progress of the 12 property companies now listed on the exchange. And while that figure may fail to take the breath away, it still reflects a surge of interest in the WSE, which at the start of the year had a mere two real estate firms listed.

The giant leap from two to 12 can, in part, be explained by the growing eagerness of the Poles to embrace the capital markets, which has left the WSE in robust health. Lydia Adamczyk, a member of the exchange's management board, says that the bourse has become a "more popular way or raising capital," and that she expects to see 70 new listings on the WSE this year, a significant increase on the 38 seen in 2006 and more than the combined total on all the other Central European exchanges.

But while this is all good news, perhaps the main reason behind real estate companies listing on the exchange has as much to do with the health of the Polish property market.

Housing Poles

Buoyed by the nation's on-song economy, real estate is enjoying an unprecedented boom, with sectors ranging from warehousing to housing revelling in a market characterised by a happy clamour for new product and sky-high prices.

Orco's Mokotowska project

Take, for example, the current darling of Polish real estate, residential. Average prices in Warsaw for a square metre of living space now surpass €2,000, almost double the 2004 price, and Poland's other main cities have seen similar increases. According to real estate consultancy Cushman and Wakefield, this trend should continue into 2008.

With the market on a high, real estate companies are looking to make hay while the sun shines, and for that they need money. In fact they need an awful lot of money given that the demand has driven up land prices, and to find the cash many have turned to the exchange. And for the first half of the year, at least, investors on the WSE were happy to oblige.

"We generated €172.5m of funding, and we made it very clear that it's for the sustained growth of the company," says a contented Douglas Noble, Warsaw director of the Orco Property Group, which listed on both the Warsaw and Budapest exchanges in May. "A large chunk of the funding will be used to aggressively expand our operations in Poland. We currently have 10-12 live development projects in Warsaw and we have recently made our first venture into the secondary cities in Poland."

Other real estate companies, nursing similar ambitions, have also cashed in with success. Wroclaw-based property developer LC Corporation raised €272m in an offering that was sold out almost immediately, while JW Construction, a Warsaw firm specialising in residential, scooped up a tidy €198m when it listed in June.

But since the heady days of early summer, the shine has come off the sector somewhat. From July, the Developers Index has been gripped in a downward trend, with Orco, for example, seeing its share price fall from a high of €126 to €105.

"Up to July, real estate companies were very popular with buyers, but now they are thinking twice before purchasing," says Michal Sztabler, an analyst at the brokerage PKO BP. "They just don't believe that the sector can maintain the growth it has experienced, and house prices are already beginning to slow."

Sztabler adds that these reservations could deter other real estate companies from listing. But does this mean that the trend for listing on the exchange has died an abrupt death? No, according to the WSE's Adamczyk.

"Of course, we may not predict exactly how the market will look in the coming months, but in the long term are expectations are good," she says, citing the still vast need for housing in Poland as one aspect that will drive the market, and keep companies knocking on the WSE's door.

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