Poland has experienced one of the fastest rent increases across the European Union in the last five years – with double-digit increases in its largest cities. Reasons for this change vary from increased financing costs, inflation, to an influx of people moving to urban areas. According to global real estate consultancy, Cushman & Wakefield, in their “Residential at a Crossroads 2.0” report, average rents for a two-bedroom apartment in Warsaw are higher than in Prague, Vienna, or Bratislava. Fortunately, they are far from the rents found in cities like London, Zurich, or Dublin.
Over the last five years, rental costs have increased in all EU countries, with an average increase of 10.9%. However, in Poland, rent increases amounted to a staggering 47%, surpassed only by Hungary, which saw a 50% increase over the same period, and Serbia (outside the EU).
After the outbreak of the war in Ukraine, we observed a significant drop in the availability of rental apartments, and rents soared in a very short time. The low supply coupled with running inflation and rising living costs, also high-interest rates have led mortgage installments to previously unseen levels. Over a five-year period, rents have increased the most in Krakow and Poznan, by 50% and 48% respectively. Warsaw takes the next spot with an increase of 47% and Łódź with 41%. The smallest, but no less significant, change was observed in Wrocław and Gdańsk, where rents since 2019 have increased by 36% and 31%” – explains Karolina Furmańska, an expert in the housing market at Cushman & Wakefield.
Despite these dynamics, Warsaw is only 13th among other European capitals when it comes to rent levels. Dublin, Amsterdam, Copenhagen, and Luxembourg take the lead. Even higher prices are found in London, where in June 2024 the rent for a two-bedroom apartment in the center cost over 2,500 EUR, and outside the center about 2,000 EUR. Likewise, in Bern, the capital of Switzerland, rental prices in the city center stand at around 2,200 EUR, and outside the center is 1,660 EUR.
It’s also worth noting that in Warsaw we observe a significant difference in rental rates between the city center and the suburban districts – in June 2024 this was on average as much as 260 euros. The differences in average price between the city center and its periphery in June 2024 ranged from 89 EUR in Athens to 472 EUR in Copenhagen”, Furmańska adds.
Stabilization and increasing availability of rental apartments
From the second half of 2022, demand for rental apartments began to stabilize, and the number of offers gradually increased, eventually surpassing the levels before the outbreak of the war. In June 2024, nearly 7,000 free apartments were available for rent in Warsaw alone on the Otodom portal. The increased supply laid the groundwork for a halt in rising rents, and in some cities even a slight correction was noted.
Analyzing the medians of offered rents of various types of dwellings (1-, 2-, 3-, and 4-room), in Krakow, they have risen everywhere. In many cities, we observed an increase in rents for the largest apartments – for instance in Sopot, Poznan, and Gdańsk. Both Katowice and Warsaw noted a slight decrease in median rents for the largest dwellings” – explains Furmańska.
Will PRS change the rental market situation?
Further development of the PRS (Private Rented Sector) will significantly and positively impact the Polish rental market. However, its scale is still small compared to the entire rental market, which in Poland is primarily represented by individual landlords. Currently, the PRS market covers just over 16,600 apartments in the largest Polish cities, with plans for an additional 30,000 apartments in the next few years. Official exact statistics on the number of rented apartments are not known, but it is assumed that there are almost a million private landlords. Thus, it is still the private landlords who dictate the terms”, says Furmańska.
The three largest players in the PRS market are Resi4Rent, Vantage Rent, and Life Spot, together controlling nearly half of the active PRS projects. The increase in housing supply rented by institutions may in the long run contribute to rental stabilization and its perception as a safe and sure option to live, with clear rules and the possibility of negotiating incentives or even reducing rents in longer lease agreements. The professionalization of property management is an important aspect of this sector, increasing the comfort of tenants and offering flexible rental forms, addressing the needs of a growing number of people choosing rent as an alternative to the purchase of increasingly expensive apartments.
The authors of the “Residential at a Crossroads 2.0″ report point out several factors that could contribute to the faster development of the PRS market.
High financing costs, resulting from the high level of interest rates, were the biggest barrier to the development of PRS and limited the number of transactions over the last two years. When this problem disappears, which we expect in the short term alongside falling inflation, the interest of PRS investors will grow exponentially. The demand fundamentals are still very strong, both for the PRS sector and other sub-sectors of the Living market: student homes, co-living, or serviced apartments for seniors”, explains Furmańska.
Another factor is undoubtedly hampering investment in the rental investment sector today are the unfavorable tax regulations. From January 1, 2025, the definition of a building as a tax object within property tax (PON) will particularly change. The announced amendment to the Act on local taxes and fees will undoubtedly affect not only the PRS sector but also the entire real estate market”, adds Dr. Joanna Prokurat, Partner in the tax advisory department TPA Poland.
Source: https://ceo.com.pl/polska-na-czele-wzrostu-czynszow-mieszkaniowych-w-ue-warszawa-wyprzedza-prage-i-wieden-48557
