In today's article from the series "Tuesday Mornings for Construction," we begin a new series of mornings focusing on PRS (Private Rented Sector) investments. We'd like to begin by providing you with basic information about PRS investments and the development opportunities for this market in Poland.
The PRS market, generally speaking, is the market for institutional rental of premises by professional entities conducting business activities in this field. Institutional rental agreements are most frequently concluded on this market, which, in accordance with the definition contained in Article 19f, Section 1 of the Act of June 21, 2001, on the Protection of Tenants' Rights, Municipal Housing Resources, and Amending the Civil Code (as amended), are residential rental agreements concluded by an individual, legal entity, or organizational unit other than a legal entity conducting business activities in the rental of premises.
Currently, the PRS market is largely based on two investment models:
a. BTR (build-to-rent) – in this model, a residential investment is built for the purpose of being purchased by a single entity, which then, most often, hands it over to a professional operator specializing in property rentals. In this model, the entity purchasing the property typically finances its construction.
b. BTL (buy-to-let) – a model involving the construction of a residential investment for resale to small, private investors who lease the purchased units.
Despite significant differences in ownership structure and financing methods, the above models share a common goal: building a rental housing investment.
You've likely noticed that the BTL model is largely similar to the Polish market. Small landlords, with one or two apartments for rent, are the standard model in Poland. Investments completed using the BTR model, unlike the current rental market in Poland, are characterized by a wide range of additional services, such as a gym, bicycle storage, and laundry facilities. Such investments include commercial space, which is designed to enhance the rental experience and make it accessible to as many potential tenants as possible.
Investments aimed at building apartments intended for institutional rental are specific investments that require a large capital investment, therefore, from the initial stages of the investment, it is recommended to cooperate with professional entities that will ensure its proper implementation from the very beginning, up to the signing of institutional rental agreements.
Currently, the PRS market in Poland, compared to Western European countries, is in its early stages of development, and therefore has a marginal share of the rental housing market, approximately 1%. However, according to market forecasts, this share is expected to increase each year.
There is still a shortage of apartments in Poland, including those for rent. This housing shortage has only been exacerbated by the outbreak of war in Ukraine, which has led to a mass migration of Ukrainian citizens to Poland. It is estimated that over 3 million Ukrainian citizens currently reside in Poland, potentially interested in expanding the Polish PRS housing market.
The decreasing creditworthiness of Poles, due to rising interest rates, is forcing them to remodel their plans regarding the purchase and rental of an apartment, which will have a positive impact on the development of the PRS market.
Huge housing shortages and rising interest rates are the circumstances that create economic realities, providing enormous investment opportunities in the PRS market in Poland.
In the next article we will present information on land for PRS investments.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 6, 2022
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