Key Points
- Report shows that investment in the private rented sector (PRS) has increased year-on-year with EUR 130 million invested into the sector across CEE countries in the first half of 2022
- Housing affordability deteriorated significantly in parts of Central Europe reinforcing the growth of this new asset class.
- Across the CEE region, legislation gives PRS investors the edge for further development of PRS projects.
A report by international law firm CMS and commercial real estate services and investment firm CBRE, shows that investors continue to shift their attention away from office investment in favour of other real estate sectors.
In the CEE, economic growth and loose economic policies have led to a housing price boom and made access to housing much less affordable. This has meant that rental accommodation is becoming an increasingly popular option. This trend is expected to continue as residential developers consider built-for-rent as an attractive alternative to built-for-sale.
“As the world emerges from the Pandemic, we have witnessed new ways of living,” says Lukas Hejduk, Head of the CMS CEE Real Estate Practice. “Real Estate investment is shifting as the sector looks to respond to new expectations from consumers.
“Affordability issues and population growth will force the CEE market to adapt and slowly, but steadily, to follow the pattern of the Western Europe in terms of living sector structure.”
A favourable legal framework is also a crucial factor driving PRS investment in CEE. Although the legislation affecting the PRS projects is still in the development phase, it is generally flexible and meets the dynamic requirements of this asset class. Special investor-friendly regulations affecting PRS projects have been implemented in recent years and provided auspicious conditions for the new sector growth.
As reported by CBRE, 2021 witnessed a record residential investment turnover of EUR 109 billion in EMEA and although C-5 market cannot boast similar figures, the year-on-year increase of 36% in volume in H1 2022 clearly shows a growing trend of PRS.
Joanna Mroczek, Head of CEE Research & Strategic Consultancy at CBRE, comments:
“In the light of rising interest rates, high construction costs, energy and inflation, residential rental assets (PRS) still remain a safe alternative for investors, mostly due to high undersupply and high individual and institutional demand in all the markets, supported by demographic migrations. We also observe changes of consumers habits in Central Europe in terms of mobility and attitude towards owning or renting properties. Our region is following the western cities’ trends and still has long way to go. For that reason, even despite temporary difficulties in cost planning, we observe a number of closing transactions with proven ways of securing the projects and delivering high quality assets.”
The report also argues that ESG is as important a consideration in the private renting sector as it is in other Real Estate sectors. ESG strategies adopted by residential developers include specific carbon footprint reductions in the production of new facilities, measuring performance according to international standards, implementing the principles of the “closed loop” economy and analysing opportunities to optimise investments in terms of emissions and resource consumption.”
The 2022 CMS and CBRE Private Rented Sector can be found here.
