by
Andrzej Fluderski
Mortgage Loan Department
The Polish housing market has been booming for several years now. Not only has there been a record-high number of apartments constructed, but also more and more Poles buy them, often with the help of a mortgage loan.
Aid programs, such as MdM (Flat for Young People) or previous RnS (Family on its Own), are the main reasons for that. Interestingly, however, up to 60% of transactions concluded recently have been covered in cash. These purchases are regarded mainly as investments – profits from rental can exceed the profit on a deposit.
The sales of mortgage loans in Poland in 2013–2016 (in million PLN)
Buying an apartment is no easy thing
When starting their adult life, young people have to decide whether they want to buy or rent an apartment. At 25-30, only few of us have the capital to buy an apartment with cash, and the rest of us have to take out a mortgage loan. This is not easy either, as banks have a lot of requirements that have to be met to be granted a loan of PLN 200,000 or 300,000 for 20–30 years. Let’s assume you have a well-paid job, you have found an apartment that meets your expectations and you are ready to purchase it. To that end, you will take out a loan of PLN 250,000 for 25 years.
So far so good, but after 5 years you decide that the neighborhood is one big cluster of concrete blocks of flats (many new buildings have been erected in the meantime), 2 rooms will not be enough when you have a baby, and after changing your job the commutes take 1 hour longer anyway. What now?
Rental is more flexible
From that point of view, rental seems more beneficial. When the current location, size or standard no longer suit you, you can simply start looking for something else. You can even turn your life around 180 degrees and move to another city if you like. Therefore, rental seems a better solution for the so-called free spirits. It is also an interesting option for the first years of an independent life, if only to see whether you can afford monthly rent, whose amount is similar to a loan installment.
When starting their adult life, young people have to decide whether they want to buy or rent an apartment. At 25-30, only few of us have the capital to buy an apartment with cash, and the rest of us have to take out a mortgage loan. This is not easy either, as banks have a lot of requirements that have to be met to be granted a loan of PLN 200,000 or 300,000 for 20–30 years. Let’s assume you have a well-paid job, you have found an apartment that meets your expectations and you are ready to purchase it. To that end, you will take out a loan of PLN 250,000 for 25 years.
So far so good, but after 5 years you decide that the neighborhood is one big cluster of concrete blocks of flats (many new buildings have been erected in the meantime), 2 rooms will not be enough when you have a baby, and after changing your job the commutes take 1 hour longer anyway. What now?
Rental is more flexible
From that point of view, rental seems more beneficial. When the current location, size or standard no longer suit you, you can simply start looking for something else. You can even turn your life around 180 degrees and move to another city if you like. Therefore, rental seems a better solution for the so-called free spirits. It is also an interesting option for the first years of an independent life, if only to see whether you can afford monthly rent, whose amount is similar to a loan installment.
Bank’s or mine?
You can joke around that an apartment really belongs to the bank until you have paid the loan, but it is more complicated than that. You are the owner and can decide what to do with it (as long as you pay the installments ;-) ). Therefore, returning to the hypothetical scenario, if you get bored of the apartment after 5 years, you can simply change it. You can sell it and repay the loan, and spend the rest on a new apartment. Or you can rent it out and gain additional profits, and find something new for yourself. The apartment is still your property, contrary to rental, which, after 5 years, leaves you with nothing.
“Apartment Plus” program is a good alternative
We are also interested to see the currently unfolding situation with the Apartment Plus program. Next year, the government will cease to subsidize loans and, instead, it will offer state apartments to be rented at preferential rates. According to the first published versions of the “price list”, which is different for different areas of Poland, this might be a good alternative to actually purchasing an apartment. All the more so as the rented flat could then be bought out. Thus, it is a 2 in 1 of a kind, which many people will definitely find appealing. For those who are currently renting a flat this is certainly a beneficial solution, not so much so for those who have bought an apartment to rent it out. When new competition with lower prices enters the market, the profitability of investments automatically drops. This is a subject for a separate article, though.
You can joke around that an apartment really belongs to the bank until you have paid the loan, but it is more complicated than that. You are the owner and can decide what to do with it (as long as you pay the installments ;-) ). Therefore, returning to the hypothetical scenario, if you get bored of the apartment after 5 years, you can simply change it. You can sell it and repay the loan, and spend the rest on a new apartment. Or you can rent it out and gain additional profits, and find something new for yourself. The apartment is still your property, contrary to rental, which, after 5 years, leaves you with nothing.
“Apartment Plus” program is a good alternative
We are also interested to see the currently unfolding situation with the Apartment Plus program. Next year, the government will cease to subsidize loans and, instead, it will offer state apartments to be rented at preferential rates. According to the first published versions of the “price list”, which is different for different areas of Poland, this might be a good alternative to actually purchasing an apartment. All the more so as the rented flat could then be bought out. Thus, it is a 2 in 1 of a kind, which many people will definitely find appealing. For those who are currently renting a flat this is certainly a beneficial solution, not so much so for those who have bought an apartment to rent it out. When new competition with lower prices enters the market, the profitability of investments automatically drops. This is a subject for a separate article, though.
