September 17, 2021

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Buying apartments in bulk by a Scandinavian fund.  How do such operations affect prices?

Buying apartments in bulk by a Scandinavian fund. How do such operations affect prices?

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The deal that NREP executed should be impressive because of its scale. However, experts note that this is not the first operation of this kind.

Previously, foreign investment funds purchased apartments in large quantities in Poland. Such was the case of the Swedish company Heimstaden Bostad, which acquired more than 3,000 properties in the capital this year. This time, the Danish investor targeted the premises of the Finnish developer YIT, located in a total of 4 properties in Warsaw. It concerns Parkur Residence and Nordic Bemowo, which are already under construction, as well as two planned phases of the Smartti Mokotów project.

Market observers agree that the above transactions are only the beginning of the wholesale acquisition of Polish real estate by foreign investors. While such operations in the West are already on the agenda, they are new to our country. No wonder it raises questions about the future of the market, especially about home prices.

Before we try to answer the question of the possible effects of such transactions, let’s consider why they are happening now. There is no doubt that the reasons for the entry of foreign money into the Polish real estate market must have appeared in the pandemic of the emerging Corona virus more than a year ago.

Experts point to the short pause that occurred during the first shutdown in early 2020. A moment of uncertainty halted demand for Poles-born apartments. Therefore, the developers faced persecution, and were soon bailed out by foreign investment funds. Whereas earlier it was profitable for contractors to sell properties individually, in the era of the pandemic, spot capital proven from abroad has become a much better solution.

Today Poland is a very attractive market for powerful foreign investors. Trusts like NREP buy us apartments for rent. It turns out that they can earn up to twice what they earn in some Western countries. Moreover, until now these investors were mainly interested in office space, but for obvious reasons they have now “turned” into apartments for rent.

Critics of mass acquisitions of Polish apartments by foreign funds note that such operations could significantly raise the already soaring real estate prices in Poland. This was about to happen in Great Britain or Germany, where the average citizen could not buy his own four corners, and was thus limited to renting. On the other hand, large companies making huge investments may offer lower rents, which will benefit the tenants. On the other hand, real estate purchases of this size are more likely to drive up prices in the primary market.

According to supporters of this type of transaction, they will contribute to the development of the rental market, which will allow many Poles to live in much better conditions. It should be noted that investors who buy real estate for the purpose of selling it at a profit will also benefit. Apartments that are currently being purchased may gain value faster in the next few years than before.

It is impossible to determine how the wholesale investments of foreign funds will affect the Polish real estate market. It is worth remembering that some Western countries have already done this. Following their example, we can expect a strong development of the institutional lease, at the expense of more difficult access to the primary market.

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