State moves into residential market
Residentialschedule 28 July 2017
POLAND The Polish residential market is soon to change in terms of quality and organisation according to the ‘Residential Market in Poland’ published by CBRE.
“Individual construction and development companies have the largest share of the market with the two groups being jointly responsible for over 90 pct of the primary market supply,” states the report. “The demand is mostly generated by people buying apartments for their own needs as well as investors buying apartments for rent or on a speculative basis.”
The number of those buying apartments as an investment is increasing and in 2016 they were responsible for 10-13 pct of the demand on the primary market.
“The average profit of rental apartments fluctuates from 4.7 to 5.0 pct per year,” writes CBRE. “This is a level that is also acceptable for institutional investors who consider the rental market an alternative to the competitive office and retail markets”.
The high rising demand for apartments that has been seen since 2014 means that as much as 60 pct of the supply is bought as soon as it comes on the market. “In principle, to be granted bank financing it is necessary for an investor behind a residential project to present presales of 20-25 pct of either the apartments or the useable area (depending on how the sales are structured and the amount of risk perceived by the bank). Residential developers often achieve such presales within two quarters of launching sales for the project,” states the report.
According to the report, recent government activities show that we are moving from a liberal residential policy in which the state was mostly involved in helping the market to develope and setting up the proper legal environment to an interventionist policy in which the state is an active market participant.
“On the one hand the state is entering those areas where it is difficult to generate the kind of profit that developers expect but on the other, it has completely different access to land and does not pay the costs of its commercial acquisition or of its financing,” states the report. While the BGK housing project, launched in 2014, which was aimed at reversing an unfavourable trend by promoting institutional rent and increasing the mobility of citizens, could be considered as an important impetus for the creation of a new market sector, its current activities could have a significant impact on the market and the profitability of businesses financed on the basis of market risk by developers and institutional investors. We mostly see a risk that purchasing and/or relocation decisions will be postponed until the effects of the aforementioned residential policy materialise in the form of constructed, delivered and occupied buildings. The legal part of the report was written by Baker & McKenzie. “Even though the rental institution is strictly regulated in the Polish legal system, lawmakers have nonetheless left some room for negotiation between the parties,” states the report. “The advantage of a temporary rental contract over a classic lease is particularly important for the landlord in situations where relations between the landlord and tenant do not work out as expected.”
The number of those buying apartments as an investment is increasing and in 2016 they were responsible for 10-13 pct of the demand on the primary market.
“The average profit of rental apartments fluctuates from 4.7 to 5.0 pct per year,” writes CBRE. “This is a level that is also acceptable for institutional investors who consider the rental market an alternative to the competitive office and retail markets”.
The high rising demand for apartments that has been seen since 2014 means that as much as 60 pct of the supply is bought as soon as it comes on the market. “In principle, to be granted bank financing it is necessary for an investor behind a residential project to present presales of 20-25 pct of either the apartments or the useable area (depending on how the sales are structured and the amount of risk perceived by the bank). Residential developers often achieve such presales within two quarters of launching sales for the project,” states the report.
According to the report, recent government activities show that we are moving from a liberal residential policy in which the state was mostly involved in helping the market to develope and setting up the proper legal environment to an interventionist policy in which the state is an active market participant.
“On the one hand the state is entering those areas where it is difficult to generate the kind of profit that developers expect but on the other, it has completely different access to land and does not pay the costs of its commercial acquisition or of its financing,” states the report. While the BGK housing project, launched in 2014, which was aimed at reversing an unfavourable trend by promoting institutional rent and increasing the mobility of citizens, could be considered as an important impetus for the creation of a new market sector, its current activities could have a significant impact on the market and the profitability of businesses financed on the basis of market risk by developers and institutional investors. We mostly see a risk that purchasing and/or relocation decisions will be postponed until the effects of the aforementioned residential policy materialise in the form of constructed, delivered and occupied buildings. The legal part of the report was written by Baker & McKenzie. “Even though the rental institution is strictly regulated in the Polish legal system, lawmakers have nonetheless left some room for negotiation between the parties,” states the report. “The advantage of a temporary rental contract over a classic lease is particularly important for the landlord in situations where relations between the landlord and tenant do not work out as expected.”
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