POLAND - The polish government needs to "get a grip" on its real estate market by lifting the prohibition on pension funds investment, according to Ben Habib, CEO of First Property, the London-listed Polish property investor. "The big issue in Poland is the lack of a local market. The problem is that Polish pension funds can't buy property - they can only buy bonds and equities. So there is no institutional market for property," he said. Section 141 of Polish pension regulation omits real estate from the list of asset classes in which domestic pension funds may invest. That omission - especially for second-pillar providers with collective AUM of €47.4bn - has effectively left the field clear for overseas pension funds to mop up property assets across the market. First Property, which recently appointed former Universities Superannuation Scheme (USS) chief investment officer Peter Moon as a non-executive director, also manages a third-party property fund for the £28bn (€33bn) scheme. USS is the firm's third largest shareholder, with 8.7%. Limited property supply and embedded rental growth via consumer price index (CPI) linkage have boosted the market's appeal to institutional investors. However, a question mark hangs over Central and Eastern European markets, including Poland, because a lack of domestic liquidity has skewed reliable pricing. "Recently one Polish shopping centre delivered a 10% yield, another a 6.75% yield," said Habib. "That kind of anecdotal inconsistency makes investors nervous. Whether the property is prime or secondary makes a difference but in the same category it needs to be definable." Earlier this year, Habib said the fact that overseas investors dominate the Polish real estate market left it prone to the withdrawal of capital by investors when they retreated to their domestic markets. In contrast, the development of a "vibrant internal market" would allow the government to address a significant budget deficit by selling state-owned property assets. "But without an institutional market there's no one to sell it to. I don't know if an internal market is on the cards, but it should be," he said. The Chamber of Polish Pension Fund Administrators (IGTE) did not respond to requests for comment before deadline.