The PRS market in Poland has surpassed 20,000 apartments on offer, but still constitutes a fraction of the entire rental market and faces challenges. According to the latest “PRS Market under the Magnifying Glass” report, prepared for the third time by advisory firms CRIDO and Savills, a cooling down of the housing market does not necessarily mean more opportunities for PRS investors, as was the case, for instance, in 2022.
As per the data contained in the “PRS Market under the Magnifying Glass” report, the total supply of apartments available in the PRS (Private Rented Sector) market in Poland has exceeded 20,000 units, with another 10,000 under construction. The market is expected to be enriched by an additional 12,000 apartments over the next two years. Importantly, the milestone of 10,000 apartments was reached 8 years after the market’s inception, with the next 10,000 apartments taking only 2 years.
When it comes to city distribution, the majority of PRS apartments are being built in Warsaw and Gdańsk (nearly 2.5 thousand in each of these cities), followed by Poznań (just under 2 thousand) and Wrocław and Krakow (over 1.2 thousand in each city). In other cities, around 400 apartments are under construction.
“Comparing the current situation in the housing market to 2023, when the ‘Safe Credit 2%’ program was in effect, is misleading. This program triggered a sharp increase in apartment prices and significantly, albeit temporarily, slowed their sales” says Jacek Kałużny, Director of the Operational Capital Markets Department at Savills.
“The current situation in the housing market has consequences for PRS sector investors. In large cities, developers still approach sales transactions of entire buildings to investment funds with reluctance, as they cannot afford the prices acceptable to individual buyers. It stems from the fact that despite some slowdown, the individual sales market is still in a healthier condition than in the particularly difficult year of 2022. Many new PRS project developments will continue to occur on commercial land not dedicated for individual apartment sales” adds Jacek Kałużny.
On the rental market, after a small correction, rent prices are somewhat stabilising. Where rent prices have increased, the increase is still lower than the rate of inflation in 2024. As a result, rental has become relatively more attractive than purchasing an apartment on credit when comparing the monthly cost of both options. In the biggest cities in Poland, the average monthly difference can be as much as 900 PLN in favour of rent.
“Rent prices struggle to keep up with inflation, but PRS investors manage to valorise them in long-term agreements. Some also manage to raise the rent during renegotiations or when forming new agreements. However, currently, there are no chances for significant growth. We’re talking about an increase of about 5% annually, and in some cases a maximum of 10%, primarily in Warsaw and not in regional markets” says Jacek Kałużny. “Since apartment prices continued to grow more than rents for most of 2024, the ratio of mortgage costs to rent has become increasingly unattractive from the perspective of a person looking for an apartment. If this relationship persists, more people will opt to rent in the future, including in the PRS sector, instead of buying their own apartment. This is confirmed by a tenant survey commissioned by SW Research” adds Kałużny.
However, the PRS market faces many challenges. Anna Pleskowicz, a partner at advisory firm CRIDO, points them out. “PRS is a young player in the real estate market and it is not entirely legally and fiscally regulated. There is still much to be done here. Legal environment, filled with many uncertainties, is also a challenge for investors. Often, it’s not strictly financial indicators, such as those related to assumptions in the area of operational costs or expected rent fees that determine the profitability of a project, but issues related to property tax, VAT, or withholding tax” says Anna Pleskowicz.
Thus, it is crucial for companies to take into account all legal and tax aspects at the stage of creating the budget for a particular investment and business plan. Signed agreements to purchase property, as well as subsequent lease agreements, must then accurately reflect the intended nature of the venture. With proper planning, tax risks can often be safeguarded by obtaining the necessary tax interpretations or opinions, and potentially even insured.
Source: https://managerplus.pl/rynek-prs-w-polsce-rosnie-ale-mierzy-sie-z-wyzwaniami-prawnymi-i-podatkowymi-68667
