Investor appetite on the Polish real estate market in Q2 2017 has translated into high transaction volumes which stood at approximately €1 billion. The retail sector accounted for 80% market share of capital invested in Q2, mainly resulting from large portfolio acquisitions. If pending deals conclude, the year-end result should be close to €4.2-4.4 billion, which would be similar to the record of 2016.
Analytics at BNP Paribas Real Estate Poland reveal that cap rates for prime properties remained unchanged, however there were no sale transactions recorded in respect of top-quality schemes. Therefore the yield gap between trophy assets and more ordinary secondary buildings is widening and currently stands on average at 1.5-2.5 pps and in some cases even more.
In May 2017, the Government released a second draft bill related to REITs in Poland intended to come into force from 1st January 2018. Public consultations are ongoing.
“The long-awaited introduction of legal framework for operation of REITs will have a positive impact on the Polish commercial property market, and at the same time will increase the share of Polish capital in a market currently dominated by foreign players. Furthermore, the introduction of REITs will deliver a positive message to the domestic capital market, and as a result of establishment of a uniform legal and institutional system for operation of this type of companies, the market will significantly improve its liquidity”, Piotr Gozdiewicz, Director of Capital Markets CEE at BNP Paribas Real Estate Poland.
A statement recently issued by the president of the National Bank of Poland and delivered to the finance ministry warns of a property market bubble pumped by foreign investors supported by low interest rates in the Eurozone. This stance is of importance from the market’s point of view showing some caution before introducing REITs.
A change in the approach of the tax authorities to VAT classification of real estate transactions has caused uncertainty in the Polish investment market in Q2 2017. Tax authorities have recently challenged VAT refunds on completed transactions. In view of such trends and complications upon exit, some developers consider establishing property holding structures and funds, in which income producing schemes are placed and held.
“For the last several quarters investors have with increasing attention been analysing the possible risks relating to the changes in the Polish tax system. The latest proposals for amending the PIT and CIT act could in fact at best result in the holding back of investment decisions, and at worstlead to investors’ withdrawal from property purchases. This would not be beneficial to the property market and the economy”, Anna Staniszewska, Head of Research and Consultancy at BNP Paribas Real Estate Poland.
