Private Rented Sector: a new asset class in CEE

The private rented sector (PRS) was established as a separate  asset class in mature European real estate markets decades ago. However, in CEE people are more traditionally attached to home ownership. This is now changing. Residential prices have increased in recent years at an unprecedented pace and the current economic conditions make residential ownership even less affordable. In fact, Prague, Bratislava, and Warsaw rank among the top five least affordable European cities for the local populations.

Affordability issues push people to the rental market, and developers are recognising the opportunities this trend offers. We see more and more residential projects designed for rental across CEE cities. As the investment framework is well established, and the leasing laws are relatively flexible and offer reasonably balanced positions between owners and tenants, the environment for investors in the PRS sector in CEE is becoming more favourable.

In this report, we look at the economic indicators and the legal framework, and show that there are grounds for strong expectations that PRS will become a major new asset class in CEE. In addition, we also comment on the responsibility perspective, ESG.

Report highlights include:

• Commercial real estate services and investment firm CBRE shows that investors continue to shift their interest from office investment in favour of other real estate sectors.
• 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.
• The report argues that ESG is as important a consideration in the private renting sector as it is in other Real Estate sectors.

Please do get in touch with us if you have any questions you would like to discuss with our CEE Real Estate team.