The size of the rent market in Poland

Almost every twentieth adult in Poland lives in a flat rented at market prices. It is almost twice as much as 8 years ago. Nevertheless, we are still far from the European leaders. For example, in Switzerland half of the citizens rent apartments at market prices and in Germany or Denmark this percentage is around 40%.

CHART 1. SIZE AND STRUCTURE OF THE RENTAL MARKET IN EUROPE IN 2018 (PERCENTAGE OF THE POPULATION)

source: own study based on EUROSTAT and OECD data

The conservative attitude towards renting in Poland is determined by historical and sociological factors and our country is not an exception in this matter. In none of the former Eastern Bloc countries the percentage of landlords at market prices does not exceed 7% (the highest is in Latvia – 6.9% and in Slovakia – 6.8%). Owning an apartment appears as an indicator of a certain social status. Strong attachment to property rights is also a manifestation of the income effect materializing on the Polish real estate market. Real estate is still identified as the most secure asset, which in their particular dimension constitute a reliable, accumulated lifetime investment of capital. In Poland, the capital market is not as developed as in Western Europe, what implies the lack of a common alternative to accumulating and investing savings. In other words, owning a flat is on one hand always seen as a privilege and constitutes the fulfilment of fundamental needs, on the other hand it is a form of wealth accumulation, which is mainly the result of lack of universal investment opportunities on the securities market.

Low labour mobility of Poles is another demand factor that affects the reluctance to rent a flat. According to the Central Statistical Office data, the last positive balance of internal migration from city to city was in 2000 – precisely after a decade of political changes. Poles do not migrate internally, because if they decide to leave for work, then it will be abroad, and second of all the situation on the labour market does not require it. The place of work is primarily determined by the place of residence, not contrariwise.

Although the percentage of adults renting an apartment at market prices in Poland is relatively small, we have been observing an upward trend in this area for last several years. It is related to the ongoing demographic processes (the ‘baby boom’ generation from the first half of the 1990’s is increasingly emphasizing the need for spatial independence) and the slow change in attitude towards renting an apartment. However, supply factors that make up the rental market, play a key role in this case. The period of low interest rates has in fact created a trend in Poland to buy apartments for purely investment purposes – volume of apartments for rent is steadily increasing, which results in competition on the market both in terms of price (rent rates are flattening) and quality (flats on rental market are in increasingly better technical and functional condition). Establishment of institutional entities offering flats for rent is also significant, the largest of which is the state Housing Rental Fund. Also, more and more development companies are building for rent. Institutional rent is characterized by greater transparency and is assumed to balance the legal interests of tenants and landlords – these are the factors that increase interest in rent among Poles.

CHART 2. THE STRUCTURE AND DYNAMICS OF APARTMENT RENTAL AND THE INCREASE IN COMMUNAL AND RENT APARTMENTS IN POLAND IN 2010 – 2018

source: own study based on EUROSTAT and OECD data

Noteworthy is also the decreasing number of people using various forms of subsidized rental, meaning mostly communal, social or socio-rent apartments – the percentage of people covered by this form of support has decreased over the last 8 years by more than 4%. Economic growth and a very good situation on the labour market in recent years have definitively encouraged some rent tenants interested in better housing standards to fuel the open rental market. However, correlation between the percentage of people living in communal and rental premises with the number of newly commissioned premises of this type cannot be missed. The number of new social and rental premises decreases every year. In 2010, 3 506 communal premises were commissioned, while eight years later it was only 1 863. This trend should reverse slightly in the coming years – BGK will allocate PLN 1.3 billion in the framework of the Social Rent Construction Program in the perspective of 2019 – 2025. In addition, a program of non-returnable municipal and social housing support from the Subsidy Fund was launched last year. In 2019 – 2020, PLN 500 million will be allocated for this purpose annually, and in 2021 – 2025 this amount will double.

SUMMARY

More and more Poles decide to rent a flat on the open market, although in this term we differ significantly from the European average. Structural changes that take place on the rent market will cause an increase in Poles’ interest in this form of accomodation in the coming years. The base of municipal and rent apartments should also increase. However, it does not mean a rapid change in the structure of dwellings ownership – the rental preference will increase along with the progressing demographic changes and its dynamics will largely be determined by institutional solutions and the creation of the supply of apartments for rent of an appropriate standard.

Łukasz Stępkowski
Maintenance and Development Specialist