Renting or mortgage? We have calculated what is profitable

Last week, the Monetary Policy Council (MPC) decided to reduce interest rates again, which certainly pleased Polish borrowers. However, the decline in mortgage interest rates means a change in the relationship between the cost of renting and purchasing a home.

– “Rent or buy?” – this is a dilemma for Poles that has been present for at least a quarter of a century. The increase in interest rates on housing loans in 2022 was so large that for many people the above-mentioned question became pointless. We are talking about compatriots who have lost their creditworthiness. However, for some time now the interest rates on new “mortgages” have been systematically falling. Therefore, it is worth taking a look at the relationship between the costs of purchasing a loan and renting a model apartment in large cities, notes Andrzej Prajsnar, an expert at the RynekPierwotny.pl portal.

Rent or buy an apartment – ​​analysis assumptions

Experts from the RynekPierwotny.pl portal have prepared an analysis comparing the profitability of renting and purchasing an apartment on credit, covering data from the last 20 years. They point out that, in addition to an interesting graph, the assumptions made are of key importance and affect the comparison results.

The analysis assumes that the comparison concerns the first equal installment of a new mortgage loan taken out in a given quarter for an average-priced apartment with an area of ​​50 square meters, and the comparison also includes the average rent for an apartment with an area of ​​50 square meters, based on data from lease agreements concluded in the same quarter.

As the expert explains, the simplifying assumption is that the operating costs increasing the tenant’s rent and the operating costs incurred by the owner of the apartment (borrower) will be similar.

– Data on average purchase prices of square footage and rents were taken from the National Bank of Poland. These are average transaction prices for 1 sq m of housing on the primary and secondary markets, as well as average transaction rents for 1 sq m of housing – explains Andrzej Prajsnar.

He adds that, in turn, the loan installments were calculated assuming that the model mortgage loan in PLN has a minimum own contribution of 10 percent, equal installments, a repayment period of 25 years and the average interest rate from a given quarter calculated for new loan agreements (according to NBP data). The analysis covers the period from the third quarter of 2006 to the third quarter of 2025 and does not include subsidized housing loans (e.g. from the Safe Credit 2% program).

Rent or buy an apartment – ​​data from Warsaw and six other cities

The assumptions presented by experts allow for a better understanding of what the chart below shows. For each quarter, it presents both the first installment of the new loan and the amount of rent for renting a model apartment under the new lease agreement. The data covers Warsaw and six other large cities: Gdańsk, Gdynia, Kraków, Łódź, Poznań and Wrocław. In other words, each quarter’s results answer the question “credit or lease?”, assuming new credit and lease agreements are involved.

Rent or buy an apartment – ​​analysis results

According to the analysis, installments for a model apartment with an area of 50 sq m in Q1-Q3 2025 were still significantly higher than rents – both in Warsaw and in other large cities.

– What is noteworthy is the gradual reduction of the monthly difference between installment and rent. This trend is not only related to the decline in installments of new housing loans. The slow but systematic increases in rents recorded by the National Bank of Poland are also important, notes Andrzej Prajsnar.

The described phenomenon can be traced to the example of Warsaw. In the case of the capital city, the average monthly difference in installments and rent in recent quarters was as follows:

• Q1 2022 – PLN 761 in favor of lease,

• Q2 2022 – PLN 1,220 for the benefit of the lease,

• Q3 2022 – PLN 1,769 in favor of lease,

• Q4 2022 – PLN 1,632 in favor of lease,

• Q1 2023 – PLN 1,310 for the benefit of the lease,

• Q2 2023 – PLN 1,252 in favor of lease,

• Q3 2023 – PLN 1,220 in favor of lease,

• Q4 2023 – PLN 1,094 in favor of lease,

• Q1 2024 – PLN 1,469 in favor of lease,

• Q2 2024 – PLN 1,650 for the benefit of the lease,

• Q3 2024 – PLN 1,729 in favor of lease,

• Q4 2024 – PLN 1,666 in favor of lease,

• Q1 2025 – PLN 1,504 in favor of lease,

• Q2 2025 – PLN 1,222 in favor of lease,

• Q3 2025 (forecast due to lack of final data) – PLN 1,032 in favor of lease.

Rent or buy an apartment – ​​forecasts

The analysis also presents a much longer time horizon, which confirms that the interest rate increases in 2022 have created a special situation, i.e. a large cost gap in favor of renting.

– The most likely scenario for the next quarters is a gradual return of the relationship between the loan installment and the rental cost to a level more typical in the historical perspective. In other words, it is about reducing the gap between the costs of renting and purchasing an apartment on credit, Prajsnar predicts.