The situation in the apartment rental market is back to normal and rates are slowly rising in most cities, according to a report by Expander and Rentier.io. October rental costs were on average 5.7 percent higher than they were a year ago. The average return on investments is declining. In the case of the purchase of apartments with a loan, the rental income in most cities no longer covers the installments.
The report’s authors note that August, September and October are usually the hottest months in the rental market. This is when students look for a place for the upcoming school year. Last year, the pandemic severely limited student demand. Also, many classes at universities are held remotely.
“However, the difference 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, rent costs in October were on average 5.7 percent higher from a year ago. Compared to July, they increased by 1 percent, “- said the authors of the report.
The calculations were made on the basis of 13,770 rental advertisements and 34,237 advertisements for the sale of apartments, excluding duplicates, posted on the Internet from October 1 to 31 of this year.
Apartments for Rent
Rental rates have increased the most Rzeszów and Częstochowa. In both cities, the cost of rent rose about 10 percent in October. Compared to July this year. In Shestokhova, rates are almost back to the level they were at the beginning of 2020, the period before the COVID-19 epidemic.
Increases were recorded in the 11 cities analyzed. The Expander report shows that, unlike apartment prices, rental rates have rarely reached record levels. As shown, such a situation occurred only in Wroclaw and Pozna. “In other cities, even if rates are going up, they still can’t break previous records” – he noted.
Sosnowiec at the other end. Rental costs are down 9% in three months. Moreover, rental rates were also cheaper in ód (-3.7%), Katowice (-2.6%), Bydgoszcz (-2.2%) and Gdansk (-1.7%).
Loan installments and apartment rentals
Net profitability, after taking into account taxes and costs, decreased by 4.43%. A year ago to 4.08 per cent. in October. “This is the profitability assuming that a 50-square-meter apartment was purchased without a loan and is inhabited for the full 12 months of the year. For example, if it is empty for a month, the result drops to 3.6 percent.” – We read.
The highest net profitability in the case of purchase without a loan and assuming that the apartment is rented for 12 months is in Czestochowa – 4.9 percent. There are slightly lower rates in Szczecin (4.5%) and لودód (4.4%).
The authors of the report noted that investors who bought their apartments with money from a loan were in a certain position. “Under the current conditions, ie, record low interest rates, such an investment was very profitable. Rental income in most cities covered the entire premium and usually there was something left” – he noted.
Currently – as noted by the report’s authors – in most cities, rental income will not cover installments if the loan is granted at 90 percent. property values. “The reason is higher interest rates. The price of WIBOR 3M increased from 0.24% to 1.99%, and WIBOR 6M increased from 0.32% to 2.33%.” – We read. As a result, the interest rate on mortgage loans rose.
The report states that at the current level of WIBOR rates, the premium is still below the rental cost only in Czestochowa, Szczecin, ód and Sosnowiec. In the case of Warsaw, for example, the loan premium for the purchase of an apartment of 50 square meters is PLN 320 higher than the average cost of renting an apartment of 50 square meters (excluding the meter and administrative fees).
“However, it must be added that the higher premium of the rental income does not mean that the investor will always incur a loss. In the case of this type of investment made a year or several years ago, the profit can easily be made by selling an apartment, the price of which is usually much higher than It was at the time of purchase. In addition, much depends on the amount of money that will be paid for the installments and maintenance of the building. If the additional payment is not large, such an investment may still pay off “- emphasized the authors of the report.
Main image source: Blitwyn/Shutterstock
“Internet Geek. Food Enthusiast. Thinker. Beer Practitioner. Bacon Specialist. Music Addict. Traveler.”