Buying vs. renting: Poles’ housing choices in the face of economic challenges

In recent years, the Polish real estate market has experienced unprecedented changes that have significantly influenced the housing preferences of Polish citizens. Rising inflation, sharp interest rate increases and a consequent drastic decrease in mortgage availability have forced many people to revise their plans. An analysis of market data from recent years reveals a clear shift from the long long-dominant ownership paradigm to the growing rental popularity. In 2023, the number of taxpayers reporting rental income increased by 22%, and between 2019 and 2023, this figure increased by nearly 50%.

CHART 1. NUMBER OF TAXPAYERS REPORTING RENTAL INCOME

source: own study based on data from the Ministry of Finance

A decade of ownership – a look into the past (2019 – 2021)

For many years, owning a housing in Poland was considered not only as a life goal, but almost a standard – a dream pursued by entire generations. Property purchase was treated as the safest form of securing the future, building capital, and creating intergenerational wealth. Low interest rates, a stable macroeconomic environment, and relatively affordable property prices in relation to the growing incomes of Poles all encouraged homeownership. A housing loan was easily available, and its monthly instalment was often significantly lower than the rent of a property.

According to data from the Polish Bank Association (SARFiN System), at that time, banks recorded high numbers of granted housing loans. In 2019 – 2020, slightly over 200 thousand loan agreements were concluded annually and in 2021 – as much as 256 thousand. According to NBP data, 80% of transactions on the housing market were supported by bank loans. Bank margins were low and the down payments were often small.

Demand for apartments exceeded supply, leading to a systematic increase in prices, both on the primary and secondary markets. According to AMRON Centre data, between 2019 and 2021 the average transaction price per 1 sqm. of an apartment in Warsaw increased by almost 35%. In Cracow, Wroclaw, and Gdansk the dynamics were similar and in Lodz, an increase by 46% was recorded. Interestingly, despite such a significant increase, the housing affordability index, i.e. the ratio of price to average incomes, remained relatively favourable, which only fuelled the demand spiral.

At the same time, less interest in long-term rental was observed. In 2019, in many cities, especially outside the student season, the rental market was stable and the pressure on rent increases was lower, as a significant percentage of people aspiring to their own apartment could afford a mortgage loan. However, the outbreak of the pandemic in early 2020 led to greater caution among market participants, and the drop in tenants caused by the outflow of students, seasonal workers, and the introduction of remote work led to a correction in rental prices in Poland’s largest cities.

At that time, one belief prevailed: “it’s better to pay off your own than to pay someone else.” Real estate was considered as a safe haven for capital – both by private individuals and investors, who began mass-buying apartments for long-term or short-term rental.

Turning point – 2022 and its consequences

After a record-breaking year 2021, the situation on the housing market began to change rapidly. 2022 was a turning point both for buyers and for developers.

A series of increases in the National Bank of Poland’s interest rates (from 0.10% in October 2021 to 6.75% in September 2022) aiming at reducing inflation, along with new requirements from the Financial Supervision Authority’s Recommendation S (the obligation for banks to include an extra 5 pp interest rate buffer) had a direct impact on the mortgage market. Poles’ creditworthiness dropped dramatically – a person, who previously could borrow PLN 500-600 thousand, was suddenly qualified for a loan half that amount. At the same time, rapidly rising maintenance costs and high housing prices significantly reduced housing affordability.

As a result, the number of newly granted housing loans decreased rapidly. Quarterly numbers of new housing loans at the turn of 2022 and 2023 were by 70% lower in comparison to the peak of 2021, and the annual result of 126 thousand new loan agreements concluded in 2022 was by 50% lower compared to the previous year and at the same time the lowest in 20 years. Demand for dwellings weakened and developers began to limit new investments. Some planned projects were suspended or postponed.

Rapidly rising mortgage interest rates – from 2.86% in Q1 2021 to 9.29% in Q4 2022 (according to NBP data) – had a direct impact on monthly instalments, which for many borrowers increased by as much as 100%. In case of a standard housing loan for PLN 300 thousand with a repayment period of 25 years, an increase in interest rates by several percentage points meant an additional cost of PLN 1 000 – 1 500 per month. For people, who took out loans in 2020 – 2021, when interest rates were still at record-low levels, such an increase was a shock. Many borrowers who initially enjoyed low repayments suddenly found themselves in a difficult financial situation.

After several quarters of dynamic changes, with reduced demand and supply (lower number of offers on both the primary and secondary markets), the housing market gradually began to stabilize. It should be pointed out, however, that this equilibrium meant not only price stabilization (at the level achieved at the turn of 2021 and 2022) but also a decrease in the number of transactions. The ongoing price growth, which had lasted for several years, began to slow significantly and in some locations and market segments, even slight corrections were observed. This phenomenon mainly affected apartments that were previously significantly overvalued, especially those in older buildings or locations with lower investment potential.

It is worth noting that despite price drops in selected locations, in other ones – particularly on the primary market – prices continued to rise. The still high demand for apartments in good locations, as well as problems with the availability of land for new investments, had a major impact here. Furthermore, developers, forced to increase prices due to rising construction costs (building materials, labour), continued their investments, even though the market was becoming more and more demanding day by day.

Meanwhile, the rental market experienced a revival. Many potential buyers who lost creditworthiness had to postpone their apartment purchase plans, and renting has become their only real housing option out of necessity. This demand was further increased by refugees from Ukraine. Moreover, the loosening of pandemic restrictions and the return of students to stationary education, as well as the partial shift away from remote work, increased the demand for long-term rental of apartments. All these factors led to demand for rental significantly exceeding supply, resulting in rent increases – in the period of the largest growths, i.e. from Q2 2021 to Q3 2022, in some cities, it was even 30-40%. It is worth mentioning that the average rent for a two-room apartment in Warsaw with approximately 45 sqm. of floor area increased by 35% during this period (excluding administrative fees and operating costs), while the instalment of a loan granted for the purchase of the same apartment (for 25 years, with LTV = 80%) more than doubled. As a result of these changes at the turn of 2021-2022, the ratio of the average apartment rent to the loan instalment in Poland’s largest cities fell below 1, meaning the loan instalment exceeded the cost of renting. This can be seen in Chart 2, showing how the relative attractiveness of purchasing compared to renting changed from a financial perspective.

CHART 2. THE RATIO OF THE AVERAGE APARTMENT RENT TO THE LOAN INSTALMENT

* Value 1 means that loan instalment = rent, value above 1 – loan instalment < rent, value below 1 – loan instalment > rent.

** Assumptions: rent and purchase cost of an apartment with a floor area of ​​45 sqm, loan granted for 25 years with LTV 80%.

source: own study based on data from NBP and AMRON Centre

Current status (end of 2023 – first half of 2025)

At the turn of 2023 – 2024, a rebuilding of mortgage demand was noted. The ‘Safe Loan 2%’ programme, introduced in response to high interest rates and housing prices, allowed some people who previously lacked creditworthiness to consider buying their own apartment again. However, after the government subsidy pool was exhausted, demand fell again. Since Q2 2024, banks have been granting approximately 45-48 thousand housing loans quarterly, which – if it maintains this level – will allow for reaching approximately 180 thousand new loans in 2025, i.e. the so-called ‘organic level’ of the mortgage market that the Polish banking sector is able to maintain without additional government support.

The rental market was returning to balance after a period of increased demand resulting from the war in Ukraine. Although rent increases have clearly slowed down, its level remained significantly higher than before 2022. This is due to a limited supply of apartments for rent (some investors may have withdrawn from the short-term rental market, but this is insufficient to meet long-term demand) combined with demand that was reduced in comparison to 2022 but remained at a high level. Additionally, high property maintenance costs, including increases in electricity and heating prices, as well as municipal services, mean that apartment owners have no space to reduce rents.

The structure of tenants has also changed. More and more people who previously planned to buy their own apartment are renting for longer than they initially anticipated. This affects both young people entering the labour market and families. Importantly, rising rents are an increasing share of household budgets. In Poland’s largest cities, where the concentration of rental demand is the highest, the average rent for an apartment constitutes over 40% of the median net salary. Such an expense is a significant challenge, especially for low-income people, making it difficult to save for a down payment or simply to function stably.

Investing in apartments for rent in Poland remains attractive. For investors with available funds, stable rents and relatively small changes in property prices (compared to previous years) mean that purchasing an apartment for rent, despite lower profitability than in previous years, can still be an attractive alternative. In the face of declining returns from bonds and other financial instruments, real estate is still considered a safe form of capital investment.

Recent interest rate cuts by the Monetary Policy Council (by 0.5 percentage points in May and by 0.25 percentage points in July 2025) increased creditworthiness and lowered monthly mortgage instalments, which should stimulate demand and increase the number of transactions on the real estate market. For the rental market, the main effect will be a partial outflow of tenants towards purchasing their own apartments, which should maintain rent stability or even cause a slight declines. However, the long-term impact on rents will depend on whether the increase in dwellings prices does not outweigh the reduction in loan costs, which could again limit ownership availability and sustain demand for rental.

Conclusions

Market data from recent years indicates a noticeable change in Poles’ housing preferences, driven by economic challenges. From a culture of ownership, there has been a slow shift towards a greater share of rental in the housing structure (although the rental market in Poland is still small in comparison to other countries – according to Eurostat data, in 2024, rented dwellings in Poland accounted for only 13% of the housing stock), which was not always a conscious choice, but often a necessity.

Key observations:

1. Housing loan availability is a determinant: It is creditworthiness, not just the willingness to own, that determines the ability to purchase apartments. Fluctuations in interest rates and creditworthiness have a direct impact on the number of transactions on the primary and secondary markets.
2. The rental market is a buffer with growing problems: It has become a buffer for those who cannot or do not want to buy an apartment. Its importance is growing, and consequently the pressure on rent increases. The current level of Poles’ income burden from housing costs (often exceeding 40%) is alarming and indicates a deepening problem with housing affordability. This situation may lead to further impoverishment of parts of society and delay economic development.
3. Housing policy challenges: The current situation questions the long-term effectiveness of programs that support only purchasing. A balanced approach is needed, which also includes the development of a stable and affordable rental market, rather than just focusing on housing loans. Without comprehensive actions that take into account both the supply and the improvement of the population’s purchasing power in the context of housing costs, the problem of housing affordability will intensify.

Agnieszka Pilcicka
Real Estate Market Senior Analyst