4500 – this is the price offered by the owner for the rental of a 40-metre studio apartment in Warsaw’s Muranów, in an advertisement published on Morizon.pl. And although this is an extreme example, when browsing classifieds websites, you can see that the price of PLN 2,000-3,000. PLN for a one-room apartment in the capital is the norm. After the pandemic market collapse, rental prices in Poland have soared.
Prices higher by 20-40 percent
The influx of refugees from Ukraine, combined with the limited availability of apartments for rent, make the prices even by 20-40 percent higher than in January this year. And there is no indication that they will begin to fall. But in the buying a flat market is maybe changing.
“The economic situation on the rental market started to return at the beginning of 2021. We slowly moved to offices, students returned to cities, and the influx of economic immigrants increased. In early 2022, rents reached their pre-pandemic level, says Bartosz Turek, chief analyst at HRE Investments. “A month or two after the outbreak of the war in Ukraine, the number of offers of flats for rent fell by 60-70 percent” he adds.
In the first days of the conflict, a large part of the refugees ended up in private flats, dormitories, hotels and night shelters organised by the state. As a result, says Bartosz Turek, the occupancy rate of hotels in provincial cities, as well as smaller ones, was or even exceeded 90 percent. With time, when it turned out that the stay in Poland was not a matter of days or a few weeks, the Ukrainians, who had financial resources, decided to rent.
“The problem is that there were so many vacant apartments in Poland on the day of the outbreak of the war that it would be enough for a maximum of a quarter of a million people. Meanwhile, three million of them came to Poland” , emphasises the HRE expert.
Moreover, as many landlords decided to help free of charge and pulled their local ones from the market, the number of apartments for rent decreased. “As a result, rental prices increased by 20-40 percent”, says Bartosz Turek and adds that in many locations it is difficult to talk about the average rental rate at present, because the number of offers on the market is so small that the calculations will be unreliable.
High prices, few offers also for studio apartment
“Lease rates have increased by an average of 15-20%, but a lot depends on the location. It is not easy to find a studio apartment in Warsaw for less than PLN 2,000 today zloty. 40 sqm rental announcement for 4500 PLN is an extreme example, and the owner of the apartment is most likely focused on the employees of the surrounding office buildings, not the Ukrainians. However, in fact, all the premises went up, including those of a higher standard” , says Marcin Drogomirecki, an analyst at Morizon.pl.
The average price for renting an apartment in Krakow is PLN 3664 PLN. In Wrocław, 4458, and in Gdańsk – 4206 (data from Morizon.pl, as of May 9, 2022). In smaller towns, it is naturally cheaper. In Leszno, we will pay an average of PLN 2691, in Opole 2012, and in Grudziądz – 1083 PLN.
According to calculations by Marcin Drogomirecki, compared to the period from six months ago, the supply of flats for rent decreased by over 50%. In March this year, the demand grew five or six times compared to the beginning of February.
The analyst observed the increased movement in the rental market in mid-February, even before the outbreak of the war, when Ukrainian citizens began to come to Poland in search of shelter. Currently, many of the Ukrainians working in Poland, as well as refugees who came to the country after February 24, bring their families. And all these people have to live somewhere.
“There is a percentage of bidders, small, but noticeable, who do not want to rent to refugee”s” admits Drogomirecki. “Some of them are afraid that the Ukrainians will not be able to pay their debts, others do not want to rent a flat for a month, two or three, as many refugees prefer, who counted on a quick return to their homeland at the beginning of March. After all, some bidders do not speak Russian or Ukrainian, and for this reason they interrupt their talks with a potential client,” explains the real estate market analyst.
Rising interest rates and rental
The demand generated by refugees is supplemented by the demand generated by people who have to give up buying a flat due to rising interest rates and decide to rent. The last and eighth increase in a row raised the main NBP interest rate to the level of 5.25 percent. and it is already known that this is not the end of the cycle.
As a result, the creditworthiness of Poles who have not yet signed a contract with a bank decreases and the financial burden on owners of apartments bought on credit is increasing. Some of the former temporarily resigned from buying their own apartment. The latter are looking for additional funds. If they sublet their local ones, the costs of the rate hikes may be passed on to the tenants.
“Currently 80-90 percent. tenants are paying pre-war rates, but that is changing. More and more contracts are beginning to adapt to the current market situation. Some owners do not want to look for new tenants and do not raise rates.
Others, however, decide to increase the rent, and tenants have the choice of agreeing to it or looking for another apartment on the market, often at a higher price. In my opinion, it is possible to increase fees by 20-30%. during the year – explains Bartosz Turek, HRE chief analyst.
In addition to high prices, the tenants’ problem is also the dwindling selection of flats. Not only do they pay a lot, but they cannot necessarily find a place in the expected location and standard. Already in January 2022, there was a shortage of about 1.5 million apartments on the market. In addition, developers build less, because less premises are sold. Market data is the worst in six years. The demand for new flats is falling, but the prices of available flats are not falling. On the contrary – the rates are still going up.
Contrary to appearances, the end of the war will not be synonymous with the end of problems on the rental market. Some of the refugees from Ukraine will return to the country, but some will not want or have nothing to come back to. Many of those who use the courtesy of Poles today will decide to rent an apartment on their own. Demand will not fall, and it may even increase. In this situation, many people are torn between renting and buying their own apartment on credit, despite rising interest rates.
Rent or loan?
“Rent or take a loan? There is no right answer to this question. Most tenants simply cannot afford to buy. Those who can afford credit have to lower the requirements. If they could afford 70 sq m earlier. in the centre of a large city, today they have to look for a similar space on the outskirts or opt for 40 sq m.” says Bartosz Turek. – The availability of flats both for people who want to buy them on credit and rent them is declining and there is no cure for it. Even the government program of loans without own contribution, which was launched on May 27, does not solve the problem, because most potential beneficiaries also suffer from the problem of diminishing creditworthiness, the expert concludes.
Marcin Drogomirecki is more optimistic in his assessment of the current situation. As he argues, although we are dealing with turbulence on the market, real estate always comes out of crises unscathed. When it comes to the landlords’ situation, it is worth considering the wider context.
“It is actually worse on the rental market, but there is no tragedy. Apartments for rent are still there, we are just used to the huge supply caused by the pandemic and distance learning.
They also caused the rental prices to be relatively low, taking into account the costs of purchasing apartments and their equipment. It can be said that now they have started to reach reasonable levels that allow the owners to amortise costs” – concludes the expert.
Source: BusinessInsider
