Flat: rent or buy on loan?

Housing topics are the head of millions of people in Poland. Housing prices, especially in larger cities, reach sky-high amounts, which makes buying them even for wealthier citizens a serious financial challenge.

The lucky ones inherit flats or receive them as a result of family reshuffles, unfortunately, there are not many of them.

A temporary solution, mainly for young people, is renting, but such residential instability cannot last indefinitely. A loan remains, which, however, binds for many years and for many people the very sound of the word can be deterrent. So what is the best solution and is there any answer to this question?

Rental in Poland and Europe

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Both renting and buying apartments on credit have their advantages and disadvantages. It all depends on your financial capacity, creditworthiness, individual preferences or just the place where you want to live. According to Good Finance research in Western Europe, almost 50 percent decide to rent.

citizens, while in Poland the percentage of landlords is only 2.5 percent. Poles are a society attached to ownership, which is why they still treat renting as a transitional stage. However, many Western tendencies penetrate Poland, which means that the percentage of landlords will probably increase over time.

The charms of renting an apartment

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The biggest advantage of renting compared to a loan is the lack of load and pressure. The rental can be stopped at any time, the location can be changed, and when financial problems arise, adjust the place and the amount of the rental to the financial possibilities.

Rental usually means no worries about repairs or furnishings, because in most cases the rented places are already equipped. Rental prices, however, are relatively high, taking into account the cost of housing loans and earnings of Poles. Data from 2015 shows that sample rental prices in selected major Polish cities (the area from 38 to 60 sq m) are:

Prices, as you can see, vary and depend strongly on the location, which, however, is most often determined by employment opportunities, not our whims. When renting, it can also be frustrating to know that we pay for someone else, not our own. When it comes to frequent conflicts with the owner, the desire to own a home can grow.

The main advantage of housing on credit

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What is a disadvantage of renting is also the advantage of buying on credit. Repaid loan installments give us the awareness and satisfaction that the money goes to ours and not someone’s apartment.

This is a huge advantage of this solution, but probably one of the few. We can easily invest in our apartment, freely renovate, furnish and design it as we like it and nobody can forbid it. The loan installment can be calibrated to be in the order of magnitude of the rental fee and if it is successful, the purchase option for a loan is quite attractive. However, not everyone can afford it.

Credit shadows

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However, the problem of credit is difficult for many people to swallow. Housing loans are long-term and bind people to the bank for 20 or 30 years.

Nowadays, many young people have unstable employment, unstable earnings and are normally afraid to enter into such long-term commitments. With the rest of the situation, working on junk contracts, it is difficult to even reach a bank’s creditworthiness and obtain a loan on favorable terms. The bank is also afraid that we will lose our job and will not be able to pay the next installments.

There are solutions such as credit holidays, but the bank does not always agree. A flat with a partially repaid loan may still be sold, but it is not always so simple. Just as renting leaves us mobility, an apartment on credit significantly reduces this mobility and binds us much more to the chosen location.

Finally, we need to go back for a moment to the abovementioned housing prices, which are huge. According to data for 2015, prices per square meter in larger cities were as follows (as in the case of rental prices, we also compare the area from 38 to 60 sq m):

In the case of credit, everything still depends on the conditions the bank offers us, but often the total amount of credit significantly exceeds the value of the apartment. Unfortunately, a great price is paid for the comfort of spreading the process over time.

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