Lack of supply keeps Warsaw residential rents flying high
High-end residential rents in Warsaw are still heavily overpriced compared to other European capitals, according to Knight Frank, the U.K.-based residential agency.
Knight Frank figures indicate that luxury property rents in the capital are higher than in Paris, Munich, Madrid and Edinburgh, with only London showing higher rents.
One of the reasons for Warsaw's high rental figures is that prime residential properties are usually rented by companies, which tend to be less budget conscious, said Katarzyna Baczynska, head of the research department at Knight Frank in Poland. "The companies, not individuals, pay those rents," she said.
As a result, renting a 240 square-meter home in a good location in Warsaw costs $5,000 as compared to $3,000 a month in Paris and less than $3,000 in Madrid and Munich (see table), the agency said. In London, however, a 200 square-meter house in a prime area can run $10,000 a month, according to the report.
Rents for apartments in multi-family buildings in Warsaw also came second behind London as the most expensive.
Property sources said that a lack of quality properties in Warsaw has pushed the prices of prime apartments and houses to unreasonably high levels.
"In Warsaw, it's mostly foreigners who rent apartments and they have a different purchasing power than Poles," said Maciej Nowotny, who owns and runs real estate agency Poland Relocation Services. "There is little supply, so if they want the standard they're used to in the West, they have to pay more."
Western tenants renting apartments in Warsaw confirm that the city has little to offer compared to other European capitals. "The pool of available good-quality apartments is certainly much lower here," said Thompson Barnhardt, president of biznespolska.pl, a Warsaw-based news portal. Barnhardt, a U.S. entrepreneur who has been doing business in Central Europe since the early 1990s, has rented apartments across the region.
"In Budapest, where the supply is much higher, one can get a quality place much cheaper than here," he said, adding that Budapest is about 25% less expensive than Warsaw.
In Budapest, the average rent for a medium-level furnished flat in the Pest half of the city runs about $10 per square meter, while prices for a luxurious apartment in Buda cost $15-$20, according to a source with the Budapest-based property press.
In Warsaw, the Dutch developer ING Real Estate, which is building its two Holland Park apartment blocks for rent near plac Trzech Krzyzy, plans to charge tenants $20-$30 per square meter a month, according to Mansion & House, the agency marketing the project (see the Business Journal, Oct. 23-29). Despite being at the lower end of the price scale, a 100 square-meter apartment in the ING project will cost as much as $2,000 a month, more than similar apartments in Paris, Munich, Madrid and Edinburgh, according to Knight Frank figures.
At the same time, when it comes to buying rather than renting apartments, Warsaw prices are nearly the lowest in Europe, according to Knight Frank.
Purchasing a high-end four-bedroom apartment in Warsaw requires $225,000, while in Western Europe only Madrid has a similar price range. Apartments for sale in Munich, Paris and London are two to four times more expensive than in Warsaw, the agency said.
Property sources said that apartment prices are lower here simply because Warsaw homebuyers have less money than buyers in the West.
"Most Poles buy, but Poles have lower purchasing power," Nowotny said.
In addition, residential purchase prices in Warsaw are significantly higher than similar apartments in Budapest. According to Knight Frank, while buying a luxurious 100 square-meter apartment in a prime Warsaw location costs $225,000, in Budapest it is enough to have $80,000-$160,000 to purchase a refurbished property on the Pest side of the city, according to the Budapest-based property press source.
Warsaw sources said that because rents are overpriced, they would have to come down eventually. "Rents have been falling and will continue to fall," Nowotny said, adding that he estimates rents to have plunged by 40% in the past two years.
"The prices here must have come down," Barnhardt agreed.
While property sources agree that rental prices will decrease, opinions vary as to whether purchase prices will follow the downward trend.
Since prices here are significantly below Western levels, they could increase along with Poles' purchasing power.
But some property sources said that the recent heavy supply of newly built apartments would push prices down in the medium term.
In 2000, about 20,000 new apartments will be completed in the Warsaw area, according to Reas Konsulting, a Warsaw-based consulting firm. Last year only about 8,000 apartments were completed in Warsaw.
"There is a lot of construction in Warsaw and that's very good (for prices)," Nowotny said.
He said that despite the rising value of the dollar, zloty-based prices have already stabilized, indicating that real prices are on the way down. In the past, when the dollar increased in value apartments became more expensive. "Now as the dollar is becoming more expensive, but apartment (prices) are stable," he said.
