What is PRS, and why can it be better to rent a flat from an institution?

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We, the Poles, have grown up in a culture of ownership. We have to own everything because that makes us adults according to society. Only in this way can we be seen as responsible people. Meanwhile, young people can no longer afford to buy their first house.

This is due to high interest rates, which now (September 2022) lower their credit score by as much as 50%. Even if they can get a mortgage, they are no longer able to pay such high interest rates. So what is the alternative?

Two alternatives for young people: live with parents or rent

A statistic published by the Central Statistical Office (GUS) in January 2022 states that over 2 million young people in Poland still live with their parents. By young people, I mean people between the ages of 25 and 34. This percentage has increased by 9 percent since 2005, and it means that 45 percent of these people cannot afford to buy an apartment or do not want to rent (i.e., due to lease conditions). This compares with around 28 percent in the EU countries.

The situation in the rental market is also not good (for renters). During the pandemic, the market was frozen for a short time, but then it has recovered and increased, especially in terms of rental prices. Individual investors in some cities have decided to raise rents, which are often very different from market prices. Of course, this is only temporary, as some market experts are talking about a deterioration in the real estate sector, which will also affect the rental sector.

Each of these situations is not good for young people. In the first case, they are not able to be independent from their parents, and in the second case, they cannot afford to save some money to start a family because rents continue to rise. And if they do not, this could lead to demographic problems.

Urgent need for a REAL solution

The consequences of not providing enough housing for young people can be disastrous. But there is one option that is reasonably reassuring. It is still renting, but from companies. It is the private rental sector – PRS.

The rental market needs to be professionalised and stabilised. When renting from individual investors, there are problems with volatile prices and uncertainties related to poorly structured leases. PRS can be a solution for these young people who want to become independent. PRS can be described as a way to rent apartments from professional investors who are engaged in economic activity. This means that there are companies that rent apartments commercially. In Warsaw, their market share is still about 2.5 percent, while in Berlin, for example, it is almost 35 percent. However, it must be said that the market share of PRS in Poland is growing rapidly, and this is good news.

Advantages resulting from the PRS

Tenants who want to rent a flat on PRS can expect more flexible terms for the lease. It is possible to sign a one-year or two-year contract, which has the advantage that the rent does not fluctuate. The rent remains the same throughout the contract period and can only be increased by a percentage of inflation when the contract is renewed. The companies of PRS operate in several cities. Therefore, if the tenant wishes to change location, it is possible to rent a flat in another city of the same operator. This will facilitate the move.

The operators of PRS ensure a high standard of the apartments for rent. The apartments are always renovated and furnished, so there are no additional costs for the tenant. Tenants can simply move in and that’s it.

If we look at the houses of the operators of PRS, they are more like a hotel than a flat. These types of developments have lots of common areas, lobbies, and green zones. But they are not hotels. They are something close to housing without owning it. PRS is the missing link between renting and owning.

Is it good to be true?

Some people claim that prices are higher in PRS, but to be honest I cannot agree with them (at least in theory). Last time I checked, the price of a studio was around 2480 PLN + bills in PRS (Resi4Rent), while a similar flat from individual investor was almost the same price. Of course, there can be differences depending on the city and standard, but to talk about a big price difference is a misunderstanding.

On the other hand, there are also voices in the market that say that PRS is driving up prices in the market. They say that housing has become more expensive as a result. It is worth saying that this is a myth. I mean, the market share of the PRS sector is still small and will not affect prices anytime soon. Maybe this impact will be felt in smaller cities, but this is just a vision for the future.

Is PRS a real solution for many Polish households? Maybe, but we have to wait to draw final conclusions.

Posted in PRS

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