According to the JLL report, in the second quarter of this year. the developers’ offer already included 43.2 thousand sq m. flats, that is how many of them were unsold, waiting for the buyer. Almost three thousand came in three months and over five thousand in a year. The current numbers are there the highest in a year and a half.
And the number of housing units on the market will soon be growing rapidly. In the coming months, construction started after the first wave of the pandemic should end, when developers started a lot of them because people were investing in real estate en masse, discouraged by the banks’ deposit offer.
If the sale is not going well, you can always rent a flat. What will be the earnings on this? Echo Investment, which four years ago came up with the idea to build apartments not only for sale, but also for rent, shared the expected revenues of the Resi4Rent project in its semi-annual report. It is currently the leader in the apartment rental market.
The project already includes 2,450 built and rented apartments in five major cities in Poland. Another 2,250 apartments are under construction, and a further 3,200 will be started this year. In the first half of this year. it brought PLN 7.9 million in revenue. For comparison, the company received PLN 62.5 million from the lease of offices, and PLN 34.5 million from the lease of shopping centers.
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The sale of apartments in Echo Investment decreased in the second quarter of this year. to 324 from 703 a quarter earlier and 920 a year earlier in the same period, so this branch of the residential business gained in importance. According to the company’s estimates, housing projects for sale by the Echo group are expected to generate ca. profit, and in the case of the Archicom group up to 90 percent. (Wroclaw) profit. And how much profit should apartments for rent bring?
10 percent from rental
It turns out that quite a lot and the developer could have come to the conclusion that instead of selling, you can also rent, the more so as the market is getting more and more difficult. According to data on ready-made projects for rent, Resi4Rent the average rate of return from 2,301 units is to amount to 9.5 percent. annually. Their construction cost PLN 700 million, and the rental income is PLN 66.6 million. In the Wrocław investment it is almost 11% of the rate of return, and in the Poznań investment – 8.4%.
2,400 apartments currently under construction according to Echo’s plan is supposed to give 10 percent. return annually. They will cost PLN 724 million, and they are to generate rental income of PLN 72.5 million per year, according to the report.
Such profitability is to be maintained with regard to 3,526 units, which the company will only start building this year for a total of PLN 1.25 billion.
Bank deposits now offer much less. Some go up to 8 percent. annuallybut when inflation goes down and interest rates go with it, then there will probably be no more such high offers. Then, apartments for rent will turn out to be an even more advantageous investment, as long as the plans are realized. The only problem is to fill them with tenants who are not in arrears with rent and do not cause damage.
“The demand for flats for rent is very strong, which confirms our faith in this market segment,” Echo Investment reported in the semi-annual report. The report shows that there are no major problems with renting at the moment.
The developers’ rate of return looks different than when you buy an apartment on the primary market from developers or on the secondary market and then rent it out. According to the August calculations of Expander and Rentier.io The average profitability of buying an apartment with an area of 50 sq m for rent was only 4.7 percent in August. net, which, taking into account the Belka tax, is the equivalent of a 5.8 percent deposit. gross.
Author: Jacek Frączyk, journalist at Business Insider Polska