It is midnight at Steel Magnolias, the trendiest club in Cracow. An Elvis impersonator in a white Lycra bodysuit is performing to an exuberant young crowd and model-like blonde waitresses charm the male contingent. Feizal Dudhia, the club’s suave owner, surveys the scene with a bottle of Veuve Clicquot and a smile of pure contentment.
Dudhia, 46, was a corporate financier in London before he fell in love with a Polish woman and followed her to Cracow five years ago. Now a growing band of British professionals are discovering the charms of Poland’s cultural capital: many are sent on relocation packages by companies such as PricewaterhouseCoopers, BP and Tesco, which have made this beautiful, historic city two hours south of Warsaw their financial services centre. All those bright high-achievers are ready to splurge their big salaries on great nights out and a glitzy apartment, only they have not been able to find places to live that would suit their lifestyle. Demand from wealthy foreign buyers far outstrips supply. Until now, that is: to the rescue comes Dudhia, wearing his other hat as project manager for Cracow’s first ultra-luxurious property development.
Owned by Mark Duval, director of the sumptuous Bendinat Estate on Majorca, 46 Rynek Glowny is a 14th-century building that has been converted into four huge apartments. They have prime position in the city’s Grand Square (the largest in Europe), overlooking St Mary’s Church, where Pope John Paul II was cardinal before he moved on to Rome. Now up for sale for round about £850,000-£900,000 (the price is negotiable), the apartments range from 137 to 177 square metres (1,475-1,905 sq ft) and combine exquisite Brazilian marble fireplaces, slate-panelled bathrooms and Siemens kitchens, with touches of Art Deco, stone mosaic floors, vaulted ceilings, murals and beautifully restored original tall wooden doors.
Dudhia says that until his friends in London actually visit they are sceptical about his passion for the place. “They ask me, ‘But what are you doing in Poland?’ They have no idea what it’s like. The country is changing rapidly and Cracow is exceptional.” Indeed, it may be brave to build the first million-pound flats in a city where salaries are low and the average cost of a decent central property is under £200,000. But Duval is confident that the market is there among wealthy British investors and Poles living in the US. They could buy a Rynek Glowny flat and rent it out for up to £40,000 a year.
The building was a ruin when Duval took on the challenge a couple of years ago. Of Polish descent, and a lawyer in Poland for many years including the communist era, he moved into property after 1989, when the political climate changed and people could take title of houses without risk. “There are some beautiful old buildings which need TLC to turn them into proper, upmarket properties for the influx of people moving here for business,” he says. “While Warsaw has seen a lot of overbuilding of modern flats, Cracow is limited, especially if you want something in the old town.” Duval’s company, Filstan Investments, has bought another derelict building in neighbouring Szewska Street. Work is under way to transform the house into seven swanky apartments, including a glass-sided penthouse, costing from £500,000, with views of Wawel Castle.
Advertisement
It is not just business people — the violinist Nigel Kennedy has lived there for several years — but also tourists who are flocking to Cracow. Cheap flights have helped to push the number of foreign visitors to the city to three million last year. It is touted as the new Prague, recalling the Czech capital before property prices rocketed and stag parties invaded.
Although Cracow bears the legacy of associations with Auschwitz, which is a little over an hour’s drive away, the city was spared bombardment because Hitler intended to live there after the war.
Those looking at buying purely as an investment can also benefit from the bed-and-breakfast market. “Monthly rental yields are quite low, but due to the shortage of accommodation a B&B operator will offer you double as a guaranteed return. And you can also still use your apartment when you want,” says Dudhia. “But, generally, this kind of property is old and probably not the sort of place you would choose to live in permanently.”
Having to deal in zloties may pose investors a challenge — while the country joined the EU last year, it is pencilled in to adopt the euro only in 2010. When budgeting for a property in Cracow, buyers should add 3 per cent agent’s fee (the same is paid by sellers), 2 per cent stamp duty, 1 per cent in lawyer’s fees and £3,500 to £6,500 in costs such as court registration.
Foreign investors do not pay capital gains tax once the property has been owned for five years or if they reinvest at any time. Otherwise it is generally 19 per cent, though that is not clear-cut and expert advice should be sought. “The assumption is that the investment is for renting out, not as a principal residence,” says Dudhia.
Advertisement
With property prices in Cracow having risen by 20 to 25 per cent last year and by a similar amount each year since 2001, the numbers look good. Mortgage interest rates are just under 7 per cent and mortgages of up to 80 per cent are available to foreign buyers.
But for any potential buyer the Polish language is a hurdle. English is spoken in business, but Dudhia says there are nuances in Polish that can escape even a good translator. “There are two similar-sounding words for ‘deposit’ in Polish,” he says. One means a refundable deposit, the other a deposit that is non-refundable. “You don’t want to confuse the two.”
So, it’s best to learn a little Polish, as Dudhia advises. He has had three lessons a week for the past year; this year, his teacher promises, they will move on to the plural.
Filstan Investments: 0048 228261572 Churchill Properties Overseas: 01983 550400, www.churchilloverseas.com