Poland has become one of the major providers of real estate investment assets for investors, with the participation of foreign capital in Polish real estate market estimated at around 90%. Investors in Poland can benefit from the high rental yields of circa 7 %. Additionally, as the property prices are still 30% lower from their heights, last seen in 2007 the market offers the prospect of a massive capital appreciation in the future.
The residential market continues to boom
Poland has the largest residential market in Central and Eastern Europe and is predominantly made up of owner-occupied housing as opposed to rental properties.
The country has seen the second highest increase in residential property prices in the EU in 2020: 11.3 percent in the Q1 2020 and by 10.9 percent in the Q2 of the year compared with the same period in 2019. Only Luxembourg saw a bigger increase in residential property prices with a 13.3 percent growth in Q2 2020!
In the first quarter of 2020 the average price per square metre in Warsaw exceeded € 2,230 per square meter. This is the most expensive city for housing in Poland followed by Wrocław, Kraków and the Tri-city area of Gdańsk, Sopot and Gdynia.
The level of sales in 2019 was only 10% lower than the 2017’s all-time high.
2019 as a record-breaking year on the Polish commercial real estate market
Poland commercial property investment hit a new record in 2019. Investors were not scared away by the rising prices of real estate, caused among others by decreasing land availability and increasing construction costs.
Commercial investors spent € 7.65 billion on Poland commercial property in 2019, up 6% y-o-y. Half of investment went on offices, with a total volume of 1.4 million square meters. The retail property sector generated over 25% of the value of all transactions equaling to €1.9 billion.
The appetite of buyers for industrial and logistics properties also remained high, but availability was lower than in previous years, which translated into a lower transaction volume of around €1.45 billion in 2019.
The use of Luxembourg real estate vehicles
Luxembourg real estate investment vehicles are attracting institutional investors, real estate promoters, developers and private investors.
In fact, many Luxembourg real estate companies are set up to acquire land or buildings, to hold, develop, refurbish and/or let, to create real estate private equity, for buy-to-let projects or to hold a participation in another real estate company.
The choice of a real estate vehicle will depend on the type of funding that needs to be raised, the proposed investor base, the type of investments to be made and any specific tax considerations.
The Luxembourg legal framework is diverse and flexible enough to fulfill a wide range of investor needs.
The taxation regime is also a key factor when considering whether to establish an unregulated or regulated real estate investment vehicle for international investors.