Residential rental market: Big global money coming in.

Poland had the second highest increase in residential property prices in the European Union in 2020. According to data by Eurostat, prices in Poland rose 11.3% in the first quarter of 2020 and by 10.9% in the second quarter of the year year-on-year. Only Luxembourg saw a bigger increase.

Rents remain stubbornly high for many people in Poland, a lot of whom voted for promises on the issue made by the ruling Law and Justice (PiS) party.

The Polish private rental sector (PRS) is on the radar for many global fund managers working with pension funds, insurance companies and sovereign wealth funds from Europe and the US, plus some APAC funds.

A recent example is the developer Atrium’s new strategy to invest in residential rental properties rather than additional retail space, as previously planned. Atrium said this month it plans to increase its residential assets to 40% of its portfolio by the end of 2025 with the remainder in prime shopping centers. Its residential expansion will focus on Poland, particularly Warsaw.

Prices rose 10-12% on the primary apartment market (new builds) and 6% on the secondary market (homes being sold on) in 2020, said Magdalena Topolska-Ziemak, of Deloitte in Warsaw. “A return of 6% is far better than putting money in the bank,” she said.

The highest prices in Warsaw can be up to €10,000 ($12,129) per square meter, while the average is currently about €2,400 per square meter. Wroclaw, Krakow and the tri-city area of Gdansk, Sopot and Gdynia all had an average prices of over 8,000 zloty (€1,767/$2,146).

The paradox is that Polish developers are in fact still offering some of the cheapest apartments in the EU, but which are also some of the most expensive on the continent with the monthly salary factored in.

Huge potential
Poland has the largest residential market in Central and Eastern Europe and is predominantly made up of owner-occupied housing as opposed to rental properties. The number of homes per 1,000 people is just 80% of the EU average, and it is estimated that there is a shortage of about 2 million apartments in Poland to satisfy demand, according to a report by the real estate firm C&W.

The renter electorate is much smaller than in Germany and thus not a political priority. “The government introduced its plans to build affordable housing for ordinary people, but it has largely failed to meet its targets and, ultimately, the prices of building remain the same regardless of whether it is the state or the private sector doing the developing,” Mendel said.

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