Will the PRS rental housing sector grow in Poland
What pros and cons do developers see for entering the PRS market? How fast is the institutional rental housing sector likely to develop under current conditions in Poland? Will foreign investors enter new projects? The poll was prepared by the real estate website dompress.pl.
Andrzej Oślizło, CEO of Develia S.A.:
Develia has already decided to invest in the PRS segment, i.e. apartments offered under institutional rental, in 2021. We are convinced that the offer of modern apartments in good locations, rented on transparent terms from professional operators is something that has been missing in our real estate market. Currently, this sector of the market consists of only a few thousand apartments, which is less than 1 percent of the rental market in Poland.
Virtually all investments of this type are almost 100 percent leased, and we expect demand for PRS apartments to increase. It will be generated, not only by people who will move from the ownership market to the rental market after losing their creditworthiness, but also by Ukrainian citizens who decide to stay in our country for a longer period of time. Our preparations for the first PRS projects are well advanced. Together with The Heart, we are also working on a specialized rental management platform.
It is difficult for us to comment on the government's plans to tax covenant purchases of apartments by investment funds, as we do not yet know the shape of the final arrangements. However, we are convinced that even if developers only implement the plans they have already announced and build a total of 30,000 units by 2028, it will still be only a drop in the ocean of needs.
Zuzanna Należyta, commercial director at Eco Classic:
The factors determining the development of the PRS market are the increase in housing prices and restrictions on the availability of home ownership for individual customers. However, at the moment, due to high interest rates and the actions of the FSC resulting in a decrease in the number of mortgage loans by more than 70 percent, cooperation with funds is a necessity. The investment process takes several years in case of a sudden change in the situation, developers are left with a large supply of apartments that need to be liquidated.
PRS funds, as a wholesale buyer, obtain lower purchase prices from the developer and at the same time impose greater requirements for additional installations on the developer. The result is a reduction in the margins of development companies, thus limiting the growth of the industry.
Jacek Wesolowski, Managing Director of Trei Real Estate Poland:
The institutional rental market in Poland is relatively young and at an early stage of development, which will probably involve changes in legal regulations. Undoubtedly, a transformation of the housing market and a strengthening of the institutional rental sector awaits us in the near future. High housing prices, rising interest rates, the difficulty of obtaining mortgages mean that interest in long-term rentals will grow. That's why our strategy for the coming years is to continue growing in the PRS market.
Next year, we will begin construction of ours, the first of its kind in Poland. The Poznan PRS will provide a total of 450 apartments for rent in three buildings. The complex will offer more than 19,000 sqm of mixed-use space. In our international portfolio, we already have completed projects in Germany and the US with a total of 750 apartments available for institutional rental. We are currently developing 28 PRS projects in Germany, Poland and the US, which will deliver a total of 6,450 apartments.
Cezary Grabowski, sales and marketing director of Bouygues Immobilier Polska:
Three factors are currently having the greatest impact on the PRS market: the conflict in Ukraine, rising interest rates and the weakening position of the zloty. This is causing funds to start pulling out of deals out of fear for the future.
It would seem that a decline in creditworthiness and a turn by clients toward rentals would give the PRS market a boost. However, this has turned out to be a much more complex process. Our current focus is on building developments that are aimed at the individual customer. We want to meet housing needs in the markets of Warsaw, Wroclaw, Poznan and the Tri-City. We don't have plans to build apartments exclusively for rent, but we are constantly carefully analyzing the market and looking at various solutions that can give us development potential.
Malgorzata Ostrowska, director of the Marketing and Sales Division at J.W. Construction Holding S.A.:
Institutional leasing will continue to grow. It is underpinned by factors slowing down the housing market, primarily the slowing down of the credit market, or the general economic situation. PRS is an opportunity for some developers to get a faster return on invested capital. Due to the high prices of apartments and their low availability, the rental market is developing well, which has not escaped the attention of foreign funds, which enter the Polish market with ready know-how in the field of rental and property management.
Our company already has rental units on offer. The Warsaw Jerozolimskie Invest project is 100 percent leased, so we do not rule out increasing our activity in this segment. In particular, we are preparing investments that we have not yet put on the market.
At the moment, however, we are focusing on building investments for rent and selling units to individual customers. An example is the Pileckiego 59 Apartments project in Warsaw and the units offered there, priced from PLN 295,000 gross, secured by a notarized deed and an entry in the land and mortgage register. They can be used for short-term rentals or offices.
Angelika Kliś, Atal S.A. board member.:
We have noticed a decline in the activity of funds caused by the announcement of additional taxation of their activities by the state. This makes the future of this segment uncertain. In addition, funds are struggling with rising prices of materials and equipment. This raises the cost of buying and finishing apartments for rent. The current exchange rate of the zloty may be an ally for foreign operators here. On the other hand, however, with the weak zloty, the conversion of rent from zloty to euro reduces the profitability of the business.
It is impossible to look indifferently at the PRS segment, as it is now popular among customers who have very limited possibilities of financing the purchase of their own apartment. However, in line with our strategy, we are focusing on serving individual customers, although we do not rule out transactions with funds in the future.
Boaz Haim, president of Ronson Development:
The PRS market in Poland is characterized by very high growth potential. Until a dozen months ago, this was mainly determined by demographic factors. Generational change and the associated greater mobility of the younger generation. Today, the development of the sector is determined by economic factors, which have excluded a significant number of customers from the real estate market and froze their efforts to get their own M. PRS has one major advantage, it is supplying apartments to the market at a time when many people simply cannot afford to buy their own property. So, on the one hand, it sustains the portfolio of developers, on the other hand, it gives customers new opportunities in difficult times.
Certainly, this segment will grow. Our company will release the first 100 apartments dedicated to institutional rental in the middle of next year. They will be built in our flagship Ursus Central development. In addition, our land bank in this segment is secured for almost 2,000 apartments, in such Warsaw locations as Ursynów, Ursus, Białołęka, Wola, Bemowo and Bielany.
Justyna Hamrol-Wasielewska, director of sales and marketing at Eiffage Immobilier Polska:
Poland is a young market for PRS, so there is no doubt that this sector will develop in our country. We are a developer that was one of the first companies in Poland to join this market. We analyzed the market, prepared for this step and knew it had to happen. Our current position is that the real estate industry must have a healthy balance, which will manifest itself in the development of the institutional rental sector. This is influenced by two factors. First of all, meeting the ever-increasing housing needs, especially in large cities. Unfortunately, the rising prices of building materials, as well as high loan installments, mean that fewer and fewer customers can afford to buy an apartment. So for them the choice is clear, instead of buying they will rent. The second group for whom renting is attractive is the young generation of Poles, who definitely prefer to rent rather than buy. For them, renting is synonymous with opportunity, freedom and mobility.
The PRS sector provides a new quality and culture of renting that has been missing from the market so far. Its advantage is, first of all, the guarantee of a certain standard of housing quality. To this must also be added the management of the investment, which takes the responsibility of repairing or maintaining the facilities off the hands of the renters.
The PRS sector is an obvious corollary to market development and responds to customer demand. Customers won't have to be limited to the decision to rent from private individuals. PRS gives them a choice of premises that are new, to a certain standard, in an attractive location and with transparent lease terms.
