The situation on the flat rental market has returned to normal and rates are slowly rising in most cities, according to the report by Expander and Rentier.io. The rental costs in October were on average 5.7 percent higher than a year ago. The average return on investments is falling. In the case of apartments purchased with a loan, the rental income in most cities no longer covers the installments.
The authors of the report noted that August, September and October are usually the hottest months on the rental market. This is when students look for a place for the next academic year. Last year, the pandemic severely limited student demand. Also, many classes at universities are held remotely.
“The difference, however, is that this year there are no such severe restrictions and young people can easily find a job in large cities. As a result, in the 16 cities we examined, the rental costs in October were on average by 5.7 percent higher than a year ago. Compared to July, however, they increased by 1 percent “- the authors of the report said.
The calculations were made on the basis of 13,770 rental announcements and 34,237 flat sale advertisements, excluding duplicates, posted on the Internet in the period from 1 to 31 October this year.
Apartments for rent
Lease rates went up the most Rzeszów and Częstochowa. In both cities, the rental cost rose by almost 10 percent in October. compared to July this year. In Częstochowa, the rates have almost returned to the level from the beginning of 2020, i.e. the period before the COVID-19 epidemic.
Increases were recorded in 11 analyzed cities. Expander’s report shows that, unlike apartment prices, rental rates rarely reached record levels. As indicated, such a situation took place only in Wrocław and Poznań. “In other cities, even if the rates were rising, they still did not manage to break past records” – it was noted.
Sosnowiec is at the other extreme. The rental costs fell by 9% in three months. In addition, rental rates were also cheaper in Łódź (-3.7%), Katowice (-2.6%), Bydgoszcz (-2.2%) and Gdańsk (-1.7%).
Loan installment and apartment rental
Net profitability, i.e. after taking into account tax and costs, fell from 4.43%. a year ago to 4.08 percent. in October. “This is profitability assuming that a flat with an area of 50 m2 was purchased without a loan and that it is inhabited for the full 12 months of the year. If, for example, it is empty for a month, the result drops to 3.6 percent.” – we read.
The highest net profitability in the case of a purchase without a loan and assuming that the apartment is rented for 12 months is in Częstochowa – 4.9 percent. Slightly lower rates are in Szczecin (4.5%) and Łódź (4.4%).
The authors of the report noted that investors who purchased their flats with money from a loan were in a specific situation. “Under the current conditions, ie record low interest rates, such an investment was very profitable. The rental income in most cities covered the entire installment and usually there was still something left” – indicated.
Currently – as the authors of the report noted – in most cities, the rental income will no longer cover the installments if the loan has been granted for 90 percent. property values. “The reason is the increase in interest rates. The WIBOR 3M rate increased from 0.24% to 1.99%, and the WIBOR 6M rate from 0.32% to 2.33%.” – we read. As a result, the interest rate on mortgage loans increased.
The report shows that at the current level of WIBOR rates, the installment is still lower than the rental cost only in Częstochowa, Szczecin, Łódź and Sosnowiec. In the case of, for example, Warsaw, the loan installment for the purchase of a 50 m2 flat is PLN 320 higher than the average cost of renting a 50 m2 flat (excluding meter and administrative fees).
“However, it should be added that an installment higher than the rental income does not mean that the investor will always make a loss. In the case of this type of investment made a year or several years ago, the profit can easily be achieved by selling an apartment, the price of which will usually be much higher than at the time of purchase. In addition, a lot depends on the amount of money to be paid for the installment and maintenance of the premises. If the additional payment is not large, such an investment may still pay off “- emphasized the authors of the report.
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