© Reuters. FILE PHOTO: An apartment complex is seen in central Warsaw, Poland June 1, 2017. REUTERS / Bogdan Popescu
By Canan Sevgili, Jason Hovet and Gergely Szakacs
GDANSK, Poland/PRAGUE (Reuters) – With rising interest rates and limited supply keeping more and more people in emerging Europe out of home ownership, global and local property investors are betting into the region’s nascent private rental sector.
From almost nothing five years ago, the institutional residential real estate market has grown to the point where investors say housing is starting to challenge office buildings as a focus for money. their face.
Stanislav Kubacek, head of investment for Eastern Europe at Sweden-based Heimstaden, told Reuters: “There are many major cities in central Europe that have positive economic and demographic dynamics. and the housing market is undersupplied.”
“These are good ingredients for rental housing investments.”
According to a report by CMS and CBRE, investment in this sector, mainly in Poland and the Czech Republic, increased by 38% to 130 million euros ($138 million) in the first half of 2022.
And higher margins and scope for growth are driving new projects, market participants say.
Denmark’s NREP enters the Polish market in 2021 and plans to invest around 500 million euros in housing and logistics over the next three years, with projects in major cities such as Warsaw, Wroclaw, Gdansk and Krakow.
“Investors can see a clear market opportunity as younger generations become more open to renting, following the trend of the housing market,” said Rune Kock, managing director of NREP’s real estate division. decades ago in Western Europe, while the supply of modern rental housing was very limited.” , told Reuters.
OLD AND SO GREAT
Poland, the region’s largest economy, features a growing population in many major cities and an estimated 3 million home shortfall, but the Czech Republic and potentially Hungary also offer opportunities.
Radim Bajar, a partner at Czech investment group Mint Investments, said his 1.25 billion Czech crown ($54.81 million) fund is exploring projects in Prague, Brno and Plzen, with the goal of adding 300 to 500 apartments to the portfolio next year.
“We are now amazed at the speed of change and how the market is changing,” he told Reuters.
“We believe that in the next 10 years two-thirds of the apartments built in this country will be sold to foundations like ours and only one-third sold to homeowners.”
According to Eurostat data, Poland has an overcrowding rate – where homes lack enough room for the number of people in a household – of almost 37%, compared with the European Union average of 17.5%.
Much of the housing supply is Communist-era apartments, often prefabricated, in dire need of modernization. That’s an advantage for developers, who can target a growing pool of foreign workers with amenities like high-speed internet, gyms, and English-language leases.
“There is a huge gap in the quality, stability and predictability of leases between private landlords and institutional players,” Marek Obuchowicz, a partner at Griffin Capital Partners, told Reuters. “This creates an attractive entry point for PRS (private rental sector) players.”
** For interactive graphics:
GRAPHIC: Private Rental Sector (PRS) Production in European Cities (https://www.reuters.com/graphics/PROPERTY-EASTEUROPE/RESIDENTIAL/gdvzqqmkkpw/chart.png)
OUT OF PRICE
The region’s traditional preference for owning rather than renting has been challenged by soaring home prices since the 2008 financial crisis, fueled by economic growth and a decade of low mortgage rates. best.
“We will follow our strategy of investing in major Polish cities,” Managing Director of G City Europe (formerly known as Atrium European Real Estate), Residential Rentals Anna Dafna told Reuters. She said the company plans to launch the project to build 500 apartments in Warsaw in the first quarter of 2023.
Current yields on residential property are 100 to 200 basis points higher than in Western Europe, Cushman & Wakefield (NYSE:) data shows, with Warsaw at 5% and Prague at 4.10%. compared with 2.70% in Berlin, 3% in Amsterdam and 3.25% in London.
Changing demographics is another factor. Wysokińska-Kuzdra, a senior partner at Collier’s in Warsaw, added: “Immigration to Poland both before and after the war in Ukraine exacerbated housing shortages, as did the explosion of business services attract foreign workers who demand higher quality apartments”.
Wysokińska-Kuzdra told Reuters: “Many institutional investors are looking to take the first mover advantage and move in.
A sharp rise in interest rates across the region over the last year has cost some potential home buyers. Construction costs for developers are skyrocketing. The war in Ukraine has also created uncertainty, so some investors are focused only on completing current projects.
But investors and analysts say these are knocks that won’t derail a market that is expected to triple by 2028, to more than 63,000 apartments in Poland, according to a recent report. here by PwC.
Germany’s TAG Immobilien AG said in its third-quarter report that it plans to speed up residential construction in Poland, while Budapest-based Flatco Kft is looking for potential acquisitions in Budapest.
“Demand is there,” Marta Jacoby, chief executive officer of Flatco Kft, told Reuters.
($1 = 0.9406 euros)
($1 = 22,8040 Czech crowns)
(Additional writing and reporting by Michael Kahn, Editing by Catherine Evans)
