The Polish private rental market (PRS) will see an evolution towards professionalization rather than a revolution in the coming years, and its share in the housing market will continue to grow – said Kinga Barchoń, PwC Polska partner. For investors, this may be an attractive asset class in the long term.
“The private rental market in Poland was shaped primarily by individuals, unlike the German and Czech markets, where the share of institutional rentals grew faster. As Poland, we are in the phase of early growth. In Germany, rental accounts for over 50 percent of the share in the housing market, in the Netherlands and Denmark it is 30-40 percent, and in Poland it is approximately 8 percent.” – a partner of PwC Polska told PAP Biznes.
“So we are in the early phase of growth, but this change is reinforced by demographics and social trends, because more and more Poles simply want to rent. I don't see any other direction in which the market could go. In the coming years, the share of rentals in the Polish housing market will continue to grow, and we will still be far behind Western Europe,” she added.
As Barchoń explained, PRS, i.e. private rented sector, is the entire rental market, not only the institutional part, but primarily the private part, i.e. apartments owned by Kowalski – this is the entire market that is not state-owned (i.e. without municipal apartments).
“So we are talking here about apartments that belong to investment funds, companies, developers, which are professionally managed and rented long-term, but there is also another part of the same market, i.e. apartments owned by private individuals,” she said.
In the Polish industry context for several years PRS has a narrow meaning, only to institutional ownership – which does not fully reflect the nature of the product.
“Currently, the Polish market includes approximately 1.2 million apartments, of which institutional rentals include approximately 22,000 units plus approximately 13,000 places in student dorms,” she added.
In her opinion, the market is facing changes, but it will be an evolution rather than a revolution, a gradual change towards a professional rental market.
“This is the next stage of market maturation from dispersed, informal to professional, organized. Tenants themselves and their needs shape the market, but also, for example, supply, which is still limited,” said the PwC Polska partner.
Another factor hampering the development of the rental market are regulations, lack of legal stability and transparency, which does not help investors make decisions in the longer term.
“The regulations on institutional leases are unclear. There are discussions, for example, on the protection of tenants, but of course the most attention is focused on taxes and financing. There are no incentives for companies related to this and this does not help the development of the market,” said Barchoń.
“Simple mathematics determines the choice – if we have a plot of land, it is still definitely more profitable to develop it with apartments for sale than for rent,” she added.
However, developers may plan to diversify their activities.
“Diversification, which will allow for greater stability of the company, is a good trend and we see that developers are building such 'second' business legs. But this is still a small part of their business. I hope that there will be more such projects and that they will help close the housing gap in Poland,” added the PwC Polska partner.
According to Barchoń, investments in the area of institutional rental are an attractive asset class, but rather in the long term.
“In the short term, for example, the warehouse sector is more attractive, but there are also investors looking at the market long-term – and here investment decisions in the rental sector support trends. If an investor is able to build scale and thus achieve efficiency in managing a portfolio of apartments for rent, then the sector is attractive,” she said.
“On the other hand, a problem for foreign investors is that the rental market in Poland is dominated by our currency. Exchange rate risks may discourage investments,” she added.
After the August sale of shares in 18 companies operating on the institutional rental market for PLN 2.405 billion by Resi4Rent to Vantage Development, Barchoń does not expect further transactions of this scale in the short term.
“We can count the owners of portfolios with even a thousand apartments on the Polish market on the fingers of one hand, so it will be difficult to repeat such a transaction quickly, but it is a very good signal for the market, showing its liquidity,” she added.
In the opinion of the PwC Polska partner, in the environment of rising apartment prices and limited possibilities of taking out loans, the rental market in Poland should grow.
“However, this requires stable law and a simpler process of obtaining building permits. Currently, the pace of investment implementation on the rental market is too slow compared to housing needs. We will not fill the housing gap only with apartments for sale,” she said.
Investing in real estate itself is also a challenge, because the opportunities in Poland in this area are limited.
“When it comes to investing in real estate, Poles have no tools other than purchasing specific properties. The alternative is to keep money in the bank and as long as the interest rates on the accounts are relatively attractive, this is an option. However, most apartments are still purchased for cash – which means that Poles still consider real estate to be a safe form of investing their savings,” said Barchoń.
“Returns from private rentals are becoming less and less attractive, but we do not have other tools and instruments to invest in real estate. The situation is different, for example, in the Czech Republic, Estonia, Latvia or Lithuania. That is why the discussion about the introduction of REITs in Poland continues – but there is no political will,” she added.
According to the PwC Polska partner, REITs would not only help revive the stock exchange, but would also provide new investment opportunities.
“The introduction of REITs would, of course, require the definition of mechanisms to protect investors, which were provided for in the draft laws, but the stock exchange itself would also ensure transparency, professionalization and control of managers. At the beginning, it would probably be invested mainly by large companies, but for Kowalski it could be an opportunity to diversify risk,” she said.
Dominika Antoniak (PAP Biznes)
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