In recent years, Poland’s booming housing market has drawn particular attention of investors. Private Rented Sector (PRS), also called Build-To-Rent (BTR), is a new and increasingly popular sector of Poland’s residential market. The development potential of the institutional rental market in Poland has been confirmed by numerous investment projects implemented by foreign companies. Since the appearance of large players in the Polish rental market, this trend has also gained popularity among local developers, who are selling property projects in packages or launching their own rental platforms.
The situation looks very promising, but to assess it properly, we need to analyze more closely several other factors that stimulate or limit the development of the institutional rental market in Poland. After we perform such analyses, we will we be able to say if institutional rental will become a lasting trend or it is merely a fleeting fad.
What is institutional rental?
Private Rented Sector (PRS), also called Build-To-Rent (BTR), is sector of Poland’s residential market in which apartments are rented out by professional, specialized investors that treat residential property rental as their core business. Buildings used for such purposes are designed and built specifically for renting, with appropriate layouts of apartments and common areas (cafés, coworking spaces, and laundry rooms).
Who can own the property?
The owner of the property may be the same as its operator (manager). Alternatively, these roles may be separated: the property is owned by an investment fund and the apartments are rented out by a professional operator.
What is the scale of such projects?
In the institutional rental market, we usually take into account entire buildings or their large portions, unlike private rents from individual landlords who hold a portfolio of apartments in many buildings. In addition, tenants have access to dedicated customer service, professional apartment maintenance, and concierge services.
Institutional rental market participants
Selected factors influencing the development of Poland’s institutional rental market
Housing gap
The housing shortfall that has been observed for years poses a problem that has yet to be resolved despite rapid growth in the property development sector.
The housing gap in Poland is estimated at around 2 million apartments. This shortfall remains acute despite a significant increase in Poland’s housing stock: from 13.5 million apartments (in 2010) to over 15 million (in 2020).
Affordability of housing
Declining affordability of housing may affect interest in renting as an alternative to ownership. The most commonly cited reason why people in Poland choose rental over ownership is that they do not have the money to buy their own apartment.
Estimated affordability of housing (m2 for average salary in the enterprise)
Source: National Bank of Poland, Statistics Poland
Inability to write off depreciation of buildings and residential premises
Introduced as part of the “Polish Deal” package, the amendment to the Corporate Income Tax Act excluded depreciation write-offs of buildings and residential units starting from 2022. Consequently, owners of such buildings will pay more in income tax because they will not be able to reduce their tax base by depreciation write-offs.
Appearance of large institutional rental market players
The institutional rental market in Poland is developing in two ways: residential developers are building their portfolios of rental apartments based on their stock of land plots, while new players are focusing on acquiring development companies or buying projects ready for construction. Recent years have witnessed the appearance of large institutional rental market players in Poland, which has considerably speeded up the development of this market.
Changes in apartment prices and rental rates
Over the past 10 years (2010–2020), apartment prices have risen much faster than rental prices in almost all of the EU countries. Consequently, rental became more advantageous than the purchase of an apartment.
In Poland, the difference between the change in housing prices and rental rates is distinctly smaller – apartment prices have grown by 40% and rental rates by 33%. Until 2017, rental rates grew faster than housing prices. In 2018, this gap started to narrow. By the end of 2020, the difference between the cumulative growth rates in these two categories had evened out, and the growth in rental prices ultimately fell below the growth in apartment prices in 2021.
Changes in apartment prices and rental rates – Poland vs. the EU average (2011=100)
Source: Eurostat
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