Pole position

Has the tide turned on the Polish institutional 
property market, asks John Palmer MRICS

Investors slowly seem to be returning to the Polish property market, but they remain risk adverse with a focus on prime properties in core locations.

Banks are beginning to lend on secure institutional property and loan-to-value ratios granted are slowly increasing. In the heated days of 2007 and 2008, commercial property throughout Europe was often said to be overvalued and the readjustment that followed highlighted this.

In 2009, the UK market experienced a rapid yield compression as distressed assets were snapped up firstly by vultures followed by more conservative investors. Now there is an argument that the Polish Market may be undervalued with prime yields at 7% to 8% dependent on sector compared to 6% to 7% in more mature markets.

With bond yield spreads between properties yields and risk-free bond yields much greater than in the UK, for example, the Polish investment market appears very attractive.

Over the short-term, liquidity in the Polish Market should increase with property risk being less volatile. It is also worth noting that investment transaction costs in Poland are currently low compared to more mature markets.

Therefore it could be argued that investing today in the current Polish market may allow for a higher rate of return than later in the year before yields compress. Only time will tell if investors are brave enough to enter the water before this happens.

John Palmer MRICS is real estate advisor and director of Brittain Hadley Europe
(click here to read the European outlook)