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POLAND: Private Rented Sector – Mobility and Flexibility

July 6, 2021

A new, interesting trend of institutional rental (PRS) has appeared on the Polish real estate market, taken from the most developed markets in Europe, such as Germany, Switzerland and the Netherlands. In Poland, we are witnessing an early stage of development of this sector, to which the COVID-19 pandemic undoubtedly contributed, causing, among other things, the fear of having to take high risks by owners of newly purchased apartments, and thus making people aware of the inability to predict various phenomena on the real estate market. Moreover, the pandemic has become a reason for "shift" from short-term tourist rental, increasing interest in long-term rental, and therefore in the branch of rentals to which the Private Rented Sector may be included.

A situation significantly affecting the development of the PRS sector is the amendment to the Real Estate Development Act, the ratio legis of which is to protect buyers of new apartments. These regulations, however, may cause an increase of cost of the project on the developer's part, which in practice may lead to an increase in the prices of new flats and, at the same time, discourage potential buyers from buying real estate. In addition to the effects of the pandemic, demographic, economic and social changes also played an important role in the development of the PRS trend in the real estate market, which resulted in an increased demand for rental housing in the largest cities. Institutional investors noticed the problems young people are facing in relation to the acquisition of their own apartment due to rising real estate prices and the problematic procedure of obtaining a mortgage. Moreover, some young people, unwilling to take the risk of taking out a 30-year mortgage (even if it is available), reject the idea of being bound by such a commitment because they value flexibility, mobility and financial liquidity.

For developers, the development of the PRS sector is a significant benefit, because they are looking for new, alternative forms of earning income and trying to adapt to changing market conditions. The growing interest in the institutional rental market becomes visible especially because an increasing number of foreign investors from Germany, USA and Great Britain express their willingness to create portfolios of apartments for rent in Poland, as evidenced by the estimated number of planned and built apartments for rent, amounting to approx. 35 thousand. Currently, in Poland, there are 30 investments intended for institutional rental, with approximately 5,500 apartments. In 2020 investors have been vigorously pursuing the development of the PRS market, as evidenced by the enormous amounts invested in this type of projects, bearing considerable risk of investing in times of uncertain market conditions. Everything indicates that the spread of this trend on the Polish market is heading towards Western Europe style, which may lead to intensification of activity on the institutional rental market in each subsequent year.

The crisis of 2020, as well as demographic and social changes played a significant role in shaping all sectors of the real estate market and made flexibility and financial liquidity desired by many people, and institutional rental combined these features, while ensuring the expected quality. As a consequence, PRS-type projects have a chance of achieving considerable success on the Polish market. A professional building manager offering stable conditions and a transparent lease agreement is undoubtedly the reason why many people may decide to choose to live in this form. In addition, in the long run, a well-developed PRS sector may stabilize the prices of the real estate market, reducing the risk of the so-called speculative bubbles.

The Polish market has been attracting many foreign investors for several years now, being one of the most attractive markets in Europe in terms of return on investment. Interestingly, forecasts indicate that the PRS sector may become as interesting and profitable for investors from Poland and abroad as the warehouse sector has recently been. The increase in activity and the number of investors on the Polish market in institutional rental is a forecast of many large-scale transactions in the PRS sector.

Anna Kowalczyk-Pogorzelska

Radca prawny | Counselor at Law

T: +48 22 447 43 00

E: kowalczykpogorzelska@millercanfield.com

Sonia Dworak

Prawnik | Lawyer

T: +48 22 447 43 00

E: dworak@millercanfield.com

Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield, and is based on the facts and guidance available at the time of its release which may be subject to change. The purpose of the publication is to draw attention to the legal events indicated in it and should not be the sole basis for any decision regarding a particular course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. The services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant legislation or other legal development to the particular facts can be verified.