33 (128) 2018
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Real Estate & Construction

The professionalisation of the housing market: institutional lease

By Filip Pietrek, PR specialist, Hamilton May Real Estate Company
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A few words on the Polish housing market.

To claim that the housing market in Poland is experiencing the biggest boom it has seen in years would be stating the obvious. According to REAS, over the last year developers sold over 70,000 apartments in Poland’s six largest cities, improving their 2016 performance by 17%. And they enjoyed a 6% increase on the average listing price.

Such prosperity has been caused by a variety of factors including a persisting, major housing deficit which currently amounts to at least 2.5 million units. The situation has also been reinforced by constant growth in the job market and low unemployment (which has been constantly decreasing and recently dipped to 6.6% in January 2018), as well as a high supply of jobs, and increasing wages (over 7% in 2017). Meanwhile, low interest rates and the overall healthy state of the country’s economy have translated into the increasing availability of loans. Poles (along with citizens in the entire region of Central and Eastern Europe) still remain very attached to the idea of owning a private apartment. According to Eurostat, around 7% of Poles live in rented apartments and houses, while in Austria or Germany this figure reaches 40-50%.

This does, however, come as no surprise. Apart from the fact that in Poland owning a flat is a relatively new phenomenon and a determinant of social status, purchasing a property may be considered a significant saving in relation to long-term leasing. For many young Poles, renting a property is perceived as a transitional phase, until creditworthiness is achieved and sufficient savings are secured. The most serious drawbacks of taking out a mortgage, such as a long-term financial commitment and reduced mobility, do not convince the majority of buyers. But why?

Characteristics of the Polish rental sector

A detailed analysis of Poland’s rental sector is not simple: it is a fragmented and unregulated market with some owners hiding their rental incomes and remaining in the sector’s grey zone. Developers easily sell their products to individual buyers, obtaining satisfying margins. These factors do stimulate the segment’s consolidation. On the other hand, organisations such as Stowarzyszenie Mieszkanicznik have become more prominent and brought property-owners together and helped professionalise the market of real estate services.

According to Mieszkanicznik’s data, developed by REAS, 58% of association members do not register their business activity while owning one (31%) or even two (21%) properties. Additionally, according to the research, most of the apartments available for rent are one- or two-room flats developed between 1946 and 1989.

From the tenant's perspective, private owners’ dominance over the rental sector is not optimal. Most of these private owners do not invest in their properties to improve their standard and the quality of their service can be perceived as unprofessional. At the same time, the lease of low-priced properties remains the most common form of real estate business, which translates into an unequal relationship between the owner and the tenant in which the holder of capital has a much stronger position and is free to choose from numerous potential tenants.

However, there are many indications that the situation will change in the forthcoming years. The financial capability of tenants is growing at a similar rate to that of the buyers. Moreover, flexibility and mobility are becoming increasingly important for young Poles, while relocation within the country, resulting from better job offers or even just the improved infrastructure, is an increasingly common phenomena.

Foreign perspective

The rental sector in Western Europe is more regulated. As opposed to a regular contract, in Germany it is typical to conclude rent contracts for an indefinite period. According to a report by the Institute for Public Policy, the average lease duration in Germany is 11 years, as many people rent properties throughout their entire lives. In the UK, — where only around 20% of housing is privately rented — this number drops down to 2.5 years.

On mature Western markets, the letting process is almost always run by a professional agent. In Germany, the tenant traditionally bears the cost of an agency’s service and the commission is relatively high – often equal to two-months rent (net). New laws from 2015 transferred the agency costs on the side initialising the service (usually the owner), with early analysis proving that this change led to lower than standard commissions.

In England it’s common practice to charge the tenant, yet the commission rarely exceeds £400. While this is much less than in Germany it should be taken into account that English tenants switch flats with higher frequency than German ones, giving the letting agent more opportunities to make money. Also in England, upcoming changes to the law will ban letting agent fees paid by the tenant. In both these countries, the letting agent is often a property manager and the deposit is held either by the agency or by a third-party institution which plays the role of arbitrator.

The Polish property management market is still underdeveloped and the deposit is held by the owner. Agency service costs are born by both sides, while the commission is lower –  between 50 to 100% of one month's rent.

One of the most significant differences between Poland and Germany or the UK is rental yield. Property prices, even in the biggest Polish cities, are much lower than in Western Europe and demand from the tenants' side is growing year-by-year enabling the owners to reach a much higher yield when compared to more mature markets. According to our estimates, a Warsaw property owner may achieve as much as 6-8% gross return on investment annually.

Private rental sector in Poland

The story of the Polish PRS – the institutional lease – started when BGK bank established its Fundusz Mieszkań na Wynajem (Apartments for Lease Fund) in 2014. Its goal was to supply people not yet able to buy their own property due to price rises and expensive mortgages. Currently, the fund lists rental properties for occasional rent (tenants waive their rights to the apartment in the event of insolvency) in seven Polish cities.

2016 was groundbreaking as it saw the first major foreign institutional investor purchase a whole block of properties for rent (the purchase of 72 apartments in Warsaw’s Złota 44 tower by the German fund Catella Real Estate AG). Hamilton May are one of the agencies listing their rental properties. The next big transactions saw two purchases in Warsaw's Matexi development on ul. Pereca street and Krakow's Novum Apartments on ul. Rakowiecka, both by Dutch fund Bouwfonds IM. Neither is this over. Matexi will most likely sell a whole building on ul. Puławska to one investor looking to enter the rental market. More big players, among them Griffin Real Estate, Murapol and Golub GetHouse, are also planning to build their rental portfolio.


Professional lease operators working for a sole owner of a built-to-rent (B2R) investment are a good prospect for the tenant. This makes the lease more regulated and provides a bigger supply of high-quality apartments, especially to the less price-sensitive tenant. The growing supply has forced owners and developers to meet higher expectations, and we see that concierge services and regular cleaning have become the market standard in modern developments. This market professionalisation has been a natural process, and the market has seen the biggest Polish property portal, Otodom, raising the entry level for small advertisers, and cleansing itself from both low-quality and duplicate listings.

There are some obstacles. According to CBRE Poland Investment MarketView Q4 2017 report, the unrelenting demand on the primary market from individual clients has made it harder for investors to find suitable projects. Single-unit sales have offered developers a chance to reach higher margins – B2R is still further away. We can, however, forecast that within the next ten years the residential market in large Polish cities will mimic the Western model where most stock is owned by big investors. Foreign funds will seek aid from local operators that have superior knowledge regarding the demands of the market which in turn presents a huge opportunity for Polish service providers.

IPPR, Lessons from Germany. Tenant Power in the Rental Market
REAS, Renting in Poland. Individual Landlords and Their Housing Stock.
CBRE, Poland Investment MarketView Q4 2017
TPA, Institutional investments in the Polish private rented secto

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