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  • Anna Koval

In-Depth Analysis: Why Investing in Poland's Private Rented Sector is a Strategic Move

The Private Rented Sector (PRS) in Poland is not just growing; it's booming. The rental property market is ready for investment due to the strong demand and positive socioeconomic environment. This comprehensive article, based on Knight Frank's research, aims to provide potential investors with a deep dive into the current market trends and future prospects.


The State of the Market


Phase of Dynamic Growth

The PRS market in Poland has entered a phase of dynamic development, while it is still in its early stages when compared to Western Europe. With a vacancy rate of less than 3% and a fast rate of commercialization, the industry is clearly very active.


The Ukrainian Factor

The demand for rental homes has been greatly affected by the immigration wave from Ukraine. The Ukrainian crisis has resulted in almost 3.85 million migrants arriving in Poland, adding to the already active rental market.


Skyrocketing Rents

The cost of renting has increased significantly; in comparison to the first half of 2022, Warsaw rents have increased by 30–40%, while other regional cities have had increases of 10–30%.


Key Investment Cities

  • Warsaw: The capital city holds a dominant position with over 4,180 PRS apartments, making up over 40% of the market.

  • Wrocław: A significant player with more than 2,300 PRS apartments.

  • Kraków: Witnessing the most dynamic growth, the city has doubled its PRS apartment resources within just a year.

Socio-Economic Drivers

  1. High Property Prices: The rising cost of real estate is making people's purchasing power less, which is driving up demand for rentals.

  2. Interest Rate Hikes: The Polish central bank has raised interest rates 11 times, affecting the affordability of mortgage loans and leading to a 50% year-on-year decrease in 2022.

  3. Changing Demographics: There is a generational change occurring, with younger, employed people favoring rental properties over buy, particularly in desirable areas where buy would be prohibitively expensive.

  4. Impact of Ukrainian War: The war has led to a demographic change, further boosting the demand for rental properties.

Investment Trends and Opportunities

  1. Diversification: Increasing numbers of investors are considering the PRS sector as a way to diversify their portfolios.

  2. Financing Costs: While the rising interest rates have increased the cost of financing new projects, it has also made rental properties more attractive compared to buying.

  3. European Context: In 2022, the PRS sector attracted 20% of all European investments in commercial real estate, indicating a growing interest at a continental level.

  4. Future Supply: Around 8,300 apartments in 40 projects are currently under construction, with 6,900 expected to be completed by the end of 2023.

  5. Capitalization Rates: For top-tier assets in Warsaw, the capitalization rates are estimated to be around 5.0%-5.25%, higher than the average rates in Western Europe, offering better yield prospects.

European Residential Investment Yield

The Road Ahead: 2023 and Beyond

  • Supply Surge: Major cities like Warsaw, Łódź, and Wrocław are expected to see the most significant increase in supply.

  • Foreign Investors: Companies like Echo Investment, Fundusz Mieszkań na Wynajem, and TAG Immobilien are major players, and new entrants like Syrena, Van der Vorm, and AFI debuted in 2022.

  • Investment Volume: Institutional investments in the Polish PRS sector amounted to approximately 432.5 million EUR in 2022, and this trend is expected to continue.

Annual supply of apartments for rent from the private rental sector in Poland

Annual supply of apartments for rent from the PRS sector


Conclusion

With attractive investment potential, Poland's PRS sector is at a turning moment. The market is expected to increase significantly because of a combination of socioeconomic variables that are boosting demand and a restricted supply. For investors looking to diversify their portfolio and capitalize on high-yield opportunities, Poland's PRS sector is a direction worth taking.


Note: This article is based on the Knight Frank research report on Poland's PRS market.

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