Should you buy rental property in Warsaw now?

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Why is buying a rental property in Warsaw tricky right now?

Buying a rental property in Warsaw currently makes sense at the right price, but the average deal has become much harder to justify.

Warsaw combines expensive apartments with rents that have barely moved lately. New-build asking prices are around PLN 19,000–20,000 per square metre in many datasets, while actual transaction prices have been materially lower. The gap is useful for buyers: Warsaw is still Poland's most expensive major housing market, but sellers do not always get the headline price.

Financing adds another problem. Mortgage costs have come down from their earlier highs, but the best fixed-rate products still start around the mid-5% range and broader market offers remain close to 6%. A landlord earning a 5–6% gross rental yield therefore has very little room for tax, vacancy and repairs when the property is heavily financed.

Meanwhile, Warsaw itself still looks healthy. The city's population is about 1.87 million, unemployment is only 1.6%, and average enterprise-sector pay is above PLN 11,000 per month. Developers are also still selling thousands of apartments per quarter.

So the city looks strong, but the average rental deal does not automatically look strong. Expensive property, flat rents and costly financing mean the individual purchase price matters much more now than a broad bet on Warsaw.

Are Warsaw apartment prices still going up?

Warsaw apartment prices are currently expensive rather than explosively rising, which gives buyers more bargaining power than the headline numbers suggest.

The city remains in a completely different price bracket from most of Poland. New developments commonly advertise close to PLN 20,000 per square metre on average, while central and premium projects can easily sit well above that.

Actual deals tell a calmer story. Recent NBP transaction data put both new and second-hand Warsaw apartments closer to the mid-PLN 16,000s per square metre, while later market estimates suggested transactions moving toward roughly PLN 17,000. That leaves a sizeable gap between what sellers advertise and what buyers often pay.

Part of the apparent increase in new-build averages has also come from the mix of apartments entering the market. When several expensive central projects launch at once, the citywide average can jump even if an ordinary apartment in an outer district barely changes in value.

The latest developer data reinforce that point. Apartments newly introduced during the second quarter averaged PLN 18,593 per square metre, 8.6% below the previous quarter's new supply.

So claims that Warsaw prices are still surging need some restraint. Prices remain very high, but buyers have more choice and more negotiating room than they did during the hottest part of the cycle.

Have Warsaw rents kept up with apartment prices?

Warsaw rents have fallen behind apartment prices, and that is currently the biggest weakness in the rental-property case.

Average advertised rent has recently hovered around PLN 4,900 per month. Otodom recorded roughly PLN 4,880 earlier in the year and PLN 4,890 several months later. For an investor, that is basically a flat market.

The picture is similar by apartment size. A Warsaw studio has recently rented for a little above PLN 3,200 on average, while a typical two-room apartment has been closer to PLN 3,900–4,000.

Those are high rents by Polish standards. The problem is what investors now have to pay to collect them. Ordinary smaller apartments can cost PLN 700,000, PLN 800,000 or considerably more, depending on the district and condition.

During the earlier boom, rising rents helped compensate landlords for rapidly rising purchase prices. Today, a buyer should assume that the current rent is roughly what the apartment needs to work with.

There is still a good structural case for Warsaw rents over several years. But fast rent growth from here is an optimistic assumption, not something visible in the latest numbers.

What rental yield can you actually get in Warsaw today?

A realistic Warsaw buy-to-let deal currently needs to get close to 6% gross before we find the income side convincing.

Listing-based yield studies show a wide range across the city. Small apartments in Białołęka have recently produced calculated gross yields around 5.8%, while examples in Wola have often sat around 5–5.5%. Some apartments in Ursynów and expensive parts of Mokotów fall below 5%.

The easiest way to see the economics is to calculate the yield ourselves. Suppose we buy a 45 m² apartment for PLN 16,800 per square metre. The apartment costs PLN 756,000.

If it rents for PLN 3,939 per month, annual rent is PLN 47,268. That gives us a 6.25% gross yield.

Pay PLN 850,000 for the same rental income and the yield falls to 5.56%. At PLN 950,000, it drops below 5%.

That price sensitivity is huge. Two investors can buy almost identical Warsaw apartments and end up with very different investments simply because one negotiated PLN 100,000 better.

How much of a 6% Warsaw rental yield do you really keep?

A 6% gross Warsaw rental yield will often end up closer to 4–5% before mortgage costs once we include normal landlord expenses.

Private rental income in Poland is generally taxed through the ryczałt system. The rate is 8.5% of rental revenue up to PLN 100,000 per year and 12.5% above that threshold. The key detail is that tax is charged on revenue, so the landlord cannot simply subtract every repair or financing expense first.

Take the PLN 756,000 apartment earning PLN 3,939 per month. With twelve occupied months, it brings in PLN 47,268 annually.

An 8.5% rental tax removes just over PLN 4,000. One empty month costs another PLN 3,939. If we set aside only 0.5% of the property's value each year for furniture, appliances, small repairs and wear, that is another PLN 3,780.

Around PLN 35,500 remains before mortgage costs, letting fees and unusually large repairs. That works out to roughly 4.7% of the purchase price.

A landlord with a long-term tenant and very little maintenance can beat that. A property with frequent turnover, management fees or a costly renovation year can do considerably worse.

Once the gross yield falls below about 5%, there just isn't much left to absorb mistakes.

Does a Warsaw rental property work with an 80% mortgage?

A Warsaw rental bought with an 80% mortgage currently struggles to generate positive monthly cash flow.

Bankier's latest mortgage rankings show some of the best fixed products back in the mid-5% range, while the broader average recently moved slightly above 6% again. Financing has improved, but it is still expensive compared with Warsaw rental yields.

We can test an 80% mortgage on the PLN 756,000 apartment. The loan would be PLN 604,800.

At roughly 6% over 25 years, the monthly mortgage payment is close to PLN 3,900. Our illustrative two-room apartment rents for PLN 3,939.

Almost all of the rent therefore goes to the bank before we pay rental tax, cover an empty month or replace a broken washing machine.

Part of each mortgage payment does repay principal, so the owner is building equity. For cash-flow investors, though, an 80%-financed Warsaw rental is still a difficult proposition these days.

With 50% leverage, the numbers change dramatically. Debt service falls to roughly PLN 2,400–2,450 per month, leaving considerably more room between rent and the mortgage.

Will lower Polish mortgage rates make Warsaw rentals much better?

Lower mortgage rates would help Warsaw landlords, but another modest decline would improve good deals more than rescue bad ones.

Mortgage financing has already become cheaper compared with the earlier peak. The best current products show effective borrowing costs around the high-5% to low-6% area, and banks have cut margins considerably from earlier levels.

Suppose our PLN 604,800 mortgage falls from 6% to 5%. Over 25 years, the monthly payment drops from roughly PLN 3,900 to about PLN 3,535.

Saving around PLN 360 per month is useful. Yet the apartment is still collecting only about PLN 3,939 in rent before tax, vacancy and repairs.

Cheaper borrowing can also support property prices because owner-occupiers suddenly qualify for larger mortgages. Some renters then leave the rental market and buy, while investors face stronger competition for reasonably priced apartments.

Further mortgage-rate declines are useful upside. Buying an overpriced Warsaw apartment today and hoping cheaper debt fixes the economics later is much harder to defend.

Is there still enough rental demand in Warsaw?

Warsaw rental demand is still strong today, and the city's labour market gives landlords one of the best tenant bases in Poland.

The latest Warsaw Statistical Office data put the city's population at 1.867 million. Enterprise-sector employment is around 1.108 million people, while registered unemployment is just 1.6%.

Average gross enterprise-sector pay has climbed to about PLN 11,393 per month. That combination of high employment and high wages helps explain how Warsaw supports rents close to PLN 5,000 per month even after the recent slowdown in rent growth.

The city also pulls tenants from several different groups. Warsaw has large numbers of students, young Polish professionals, international employees and people moving from smaller cities for work. Finance, technology, business services, government and multinational companies create demand that does not depend on one employer or industry.

Professional landlords are betting on the same demand. Warsaw already has roughly 10,000 institutional rental apartments and dominates Poland's growing PRS market. Large investors have continued buying rental portfolios, including multibillion-złoty transactions.

Institutional rental is still tiny compared with Warsaw's whole housing stock, so private landlords are nowhere close to being squeezed out. Its expansion does tell us something useful: professional capital still sees enough long-term demand to build and buy thousands of Warsaw rental units.

The softer spot is employment growth itself. Enterprise-sector employment has recently been slightly lower than a year earlier. Today's tenant base is strong even if every demand indicator is not accelerating.

Do Warsaw landlords still have the power to raise rents?

Warsaw landlords currently have limited room for aggressive rent increases because tenants have more choice than they did during the rental squeeze.

Otodom counted almost 6,700 active Warsaw rental offers earlier in the year, up around 6% in a single month. At the same time, the average asking rent fell slightly month on month and year on year.

Several months later, average Warsaw rent was still sitting close to PLN 4,900. More listings plus flat rents usually means landlords have to compete harder on price, condition or location.

Lower mortgage rates add another source of pressure. Some higher-income tenants who were locked out of ownership during the expensive-credit years can now borrow more easily. Otodom's analysis of renters moving into ownership found that these households tended to buy somewhat cheaper properties than the wider group of mortgage borrowers.

The rental market still tightens seasonally around the academic year, and good small apartments can move quickly. But we would currently underwrite a Warsaw property using today's achievable rent, rather than adding an automatic 5% or 10% increase for next year.

Is Warsaw building too many apartments now?

Warsaw currently has enough developer inventory to give buyers leverage, while sales remain far too healthy for us to call the city oversupplied.

CBRE and Tabelaofert.pl found that developers introduced 4,753 Warsaw apartments during the second quarter, 66.8% more than in the previous quarter. Available developer stock reached 16,345 units, up 7.1%.

Completed apartments deserve special attention. There were 3,344 finished but unsold units, equal to 20.5% of all developer inventory. A developer paying carrying costs on an already completed apartment has a much stronger reason to negotiate than one selling a project that will not be finished for two years.

Demand has held up surprisingly well alongside that inventory. Developers sold 3,840 homes during the same quarter. Sales fell from the unusually strong previous quarter but remained 4.6% above the five-year quarterly average.

For a rental investor, this also changes the new-versus-used debate. Completed developer stock and good second-hand apartments are more interesting to us right now than automatically paying a premium for an off-plan unit.

Completed property can start earning rent quickly, and the buyer knows exactly what has been built. A second-hand apartment can be even better when the transport, service charges, layout and achievable rent are already proven.

The unusually large ready-to-sell inventory gives investors something they did not have during the hottest Warsaw market: time to compare deals and ask for a discount.

Which Warsaw apartments and districts make the best rentals?

A 35–50 m² Warsaw apartment with a separate bedroom and strong public transport is currently the safest all-round buy-to-let format, while the best district depends on how much rent we get for the purchase price.

Two-room apartments around 40 m² sit in a useful middle ground. Singles can afford them, couples want them, someone working from home can use the bedroom separately, and the resale market is much deeper than for unusual large units.

Institutional landlords have reached a similar conclusion. Much of Warsaw's professional rental stock consists of studios and compact one-bedroom apartments, with units around 40 m² appearing repeatedly across portfolios.

On location, Białołęka can produce higher yields because purchase prices are lower. Recent listing-based examples have put small-unit gross yields around the mid-5% range.

Wola costs more, but its office clusters, metro access and central location support a deep tenant pool. Smaller apartments there have often calculated around 5–5.5% gross, with some larger layouts higher.

Bielany can sit in a similar range, depending heavily on metro access. Ursynów often produces lower headline yields because buyers pay a large premium for an established residential district. Mokotów varies too much internally for one district average to be very useful.

We would rather buy an ordinary two-room apartment five minutes from good transport at a 6.3% gross yield than a beautiful apartment in a famous neighbourhood at 4.5%. For a rental property, the numbers should choose the district more than the district chooses the numbers.

How much do Polish taxes and buying costs hurt a Warsaw rental?

Taxes and transaction costs can easily wipe out a year or more of Warsaw rental profit, so short holding periods make little sense for most private landlords.

A typical VAT-exempt second-hand purchase can attract 2% PCC transfer tax. On a PLN 750,000 apartment, that alone is PLN 15,000.

The buyer can then face notary fees, land-register costs, mortgage-related charges, agent fees and renovation or furnishing expenses. A property advertised at PLN 750,000 can therefore require considerably more than PLN 750,000 before the first tenant moves in.

Rental income is generally taxed at 8.5% of revenue up to PLN 100,000 a year and 12.5% on the portion above that threshold.

Selling quickly can create another tax issue. For private individuals, a disposal before the statutory five-year period has expired can fall within personal-income-tax rules, depending on the circumstances and available exemptions.

That combination pushes us toward a long holding period. A Warsaw rental yielding 4–5% net has a much better chance of making sense over seven or ten years than over two or three.

What could make a Warsaw rental property disappoint?

The most likely Warsaw rental-property disappointment today is several years of mediocre returns after paying too much at the beginning.

Take an apartment capable of earning PLN 3,900 per month. At PLN 700,000, that rent produces a 6.69% gross yield. Pay PLN 900,000 and the same tenant gives you only 5.2%.

One vacant month takes away more than 8% of annual rent. Rental tax then takes another 8.5% for most ordinary private landlords. Repairs, insurance, furniture and owner-paid charges take another slice.

Heavy borrowing leaves even less room. A leveraged landlord whose rent barely covers the mortgage can be pushed into negative cash flow by one empty month or one expensive repair.

Capital appreciation could still compensate over a long holding period. Warsaw has population growth, high wages, limited central land and a very tight labour market. Falling borrowing costs can also bring more buyers back.

But appreciation should be extra return, not the reason to accept a poor yield. Even if Warsaw prices rise steadily over the next decade, an investor who overpays today has made the job unnecessarily difficult.

At what price does a Warsaw rental become worth buying?

A Warsaw rental starts to look attractive to us around a 6% gross yield, and a clean 6.5%+ deal gets our attention quickly.

The simplest way to invest today is to start with realistic rent and work backwards to the maximum purchase price.

Suppose a two-room apartment can reliably rent for PLN 3,900 per month. That gives us PLN 46,800 in annual rent.

At a 6% target yield, the maximum property price is PLN 780,000. At 6.5%, it falls to PLN 720,000. At 7%, we should pay no more than about PLN 669,000.

Now compare that with a seller asking PLN 900,000. The same rent gives us only 5.2% gross. At PLN 1 million, the yield falls to 4.68%.

This reverse calculation keeps us from falling in love with an apartment and inventing a return afterward. We know the rent, we know the yield we want, and those two numbers tell us what we can afford to offer.

Should you buy rental property in Warsaw now?

Yes, we would still buy rental property in Warsaw today, but only at roughly a 6%+ gross yield and preferably with cash or moderate leverage.

Warsaw itself gives us plenty to like. The city has about 1.87 million residents, unemployment is only 1.6%, enterprise-sector pay is above PLN 11,000 per month, and rents remain close to PLN 4,900 on average. Tenant demand is deep enough that we are not particularly worried about finding renters for a correctly priced small apartment in a good location.

The difficult part is the purchase price. Warsaw apartments remain very expensive while rents have barely increased lately. Once rental tax, vacancy and maintenance are deducted, a 6% gross yield can quickly become something closer to 4–5% before financing.

As seen above, an 80% mortgage is where the current economics become especially unattractive. With borrowing costs around the high-5% to 6% area, the monthly payment on a typical leveraged investment can absorb nearly all of the rent. Cash buyers and investors putting down much larger deposits have far more room.

There is also no strong reason to rush. Developers currently have more than 16,000 Warsaw apartments available, including an unusually large stock of finished units. Sales remain healthy, so we would not wait for a dramatic citywide crash, but buyers have enough choice to negotiate.

Our preferred Warsaw rental today would be roughly 35–50 m², have a separate bedroom, sit close to useful public transport and produce at least around 6% gross using a rent we can achieve now. At 6.5% or better, the deal becomes genuinely interesting. Around 4.5–5%, we would usually walk away.

Warsaw is still one of Poland's best cities for owning rental property. The easy money has disappeared, though. A good investment now comes from buying the right apartment cheaply enough rather than simply owning anything in Warsaw.

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INVESTROPA

A team specialized in real estate investing in European countries

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Warsaw. If you’d like to learn more about us, you can check our presentation page.