Is it worth selling your apartment and buying a new one now?

You are wondering whether now is the right time to sell your apartment or, on the contrary, is it better to buy or rent an apartment? Let's see which trades are currently the most profitable.

If you are wondering whether now is the right time to sell your apartment or, on the contrary, is it better to buy or rent an apartment? Let's see which trades are currently the most profitable.

The decision to sell your own property has never been easy. Getting a satisfactory price depends on many factors. Market demand, housing supply, access to mortgages and the overall economic situation are all important.

So, is the current real estate market the right time to sell your property?

Let's consider together:

• Is now the right time to sell your apartment?

• Is now a good time to be a residential property buyer?

• Is it profitable to invest in apartment rentals and how much can you earn?

Current situation in the housing market

May you live in interesting times, says a Chinese proverb, and it applies perfectly to the housing market. You can't complain about boredom. Moreover, even the best analytical minds cannot say with certainty in which direction the market will move at a given moment.

Let us remind you that all potential borrowers and those who are going to take out a loan for an apartment or house are still living in times of very expensive money - which is a consequence of a series of interest rate increases in 2021 and 2022.

From October 2023, the NBP base interest rate is 5.75%. After two decisions by the Monetary Policy Council, the base rate decreased by 1 percentage point.

And yet loans are still very expensive. Currently, a person wishing to take out a loan of PLN 350,000 must take into account an actual annual interest rate of 8.5% on average. The fee for such a loan taken for 30 years will be about 2,600 zlotys.

Despite this, all local markets saw rising home prices last year. The landscape of local property markets has been largely shaped by the government's Bezpieczny Kredyt 2% program, which has contributed greatly to increasing demand in times of dear money and therefore increasing apartment prices.

It is already known that the program will not be continued this year. However, due to the imbalance of supply and demand in the market and the high production costs of developers, experts still expect an increase in prices for residential real estate. According to analysts, although apartment prices will grow more slowly, we should expect an increase of 5-10% over the next 12 months.

Selling an apartment in 2024? Let's look at return on sales

Selling your home is definitely worth it now if you just want to get a great price, much higher than the purchase price. Apartments are systematically becoming more expensive, so if someone wants to quickly sell their apartment and at the same time make money, they can do it. Although it should be remembered that the profit from such a transaction must be adjusted for inflation. Data from the website RynekPierwotny.pl show that on the Warsaw market over 2 years the average supply prices of apartments and houses increased from 12,786 zlotys/sq.m. up to 16,585 zlotys per square meter, i.e. by 23%.

If we assume that you bought an apartment of 50 square meters in the capital two years ago, then you paid for it, on average, 639,000 zlotys. Today, such an apartment can be put up for sale at the current average price of PLN 829,000. Nominally the profit will be about 200,000 zlotys. In fact, the real value of the profit received from the sale will be several tens of thousands of zlotys lower due to inflation.

In each of the major local housing markets, home prices have risen significantly, so if you want to sell your home now, you're sure to make money.

In Krakow, a square meter of apartment now costs an average of PLN 15,580. Last year alone, prices increased by 24%. In Wroclaw, the average price of apartments on the primary market is PLN 13,112 (an increase of 11%). In Trimestiye, apartments on the primary market cost an average of PLN 14,965, which is 27% more than last year. In Poznań, an apartment costs, on average, PLN 12,332/sq.m. (an increase of 17%).

Therefore, buying and selling an apartment for cash will now be a profitable decision. However, the question is whether this solution is beneficial if we are interested in investing in real estate or are planning to buy a new apartment.

Sale of an apartment purchased on credit and purchase of a new apartment on credit

A much more complex issue is the sale of an apartment purchased on credit in order to purchase another apartment using bank financing. In such a situation, a number of factors should be taken into account - first of all, the cost of the loan, the size of your own contribution and the parameters of the apartment you want to buy.

Let's illustrate this with a hypothetical situation.

Let's assume that a few years ago someone bought an apartment (small two rooms, 40 sq. m) for 450,000 zlotys (with an average price of 11.5 thousand zlotys / sq. m.) in one of the large city markets. He paid 50 thousand out of his own pocket, so the loan amount was 400,000 zlotys. A few years later, prices for apartments on the local market increased by 20% - to 13,800 zlotys/sq.m.

Today he would sell his property for 550,000 zlotys, let's assume that during this time he paid back approximately 20,000 zlotys from the loan capital. So now, after selling and paying off the rest of the obligation, he will be left with an amount of approximately PLN 170,000. Our seller, naturally, sold the apartment with the intention of buying a new, more spacious one that would meet his current housing ambitions.

Let's say he targets 60 square meters. At current average prices, he will have to spend 820,000 zlotys on this. Since banks expect their own contribution of 20% without additional costs, our buyer will have to pay more than PLN 160,000 out of pocket for the contribution. Ultimately, the loan amount will be 650,000 zlotys. True, during this time interest rates on loans have decreased slightly, but with a much larger loan amount, the monthly payment will be significantly higher than when repaying the first, cheaper and smaller apartment. Currently, the loan fee will be about PLN 4,300. Last year, before a series of interest rate cuts, he paid a fee of about 3,200 zlotys for his smaller apartment.

The example given is, of course, illustrative and describes a hypothetical situation, but it shows what factors should be taken into account if you want to sell an apartment in order to buy a new one - presumably a better, larger one. Given the current lending conditions and constantly rising housing prices, we should expect a significant increase in the cost of the loan and, consequently, the installment loan. Money from banks is still expensive, despite two interest rate cuts. As apartment prices become more expensive, the credit-positive decline in interest rates is largely offset. This means that there will be little room for you to choose a new property unless you see a significant increase in income, but you should take into account higher monthly expenses.

Therefore, selling an apartment requires a careful analysis of what you can buy in return and what financial capabilities you have in terms of monthly payments and an analysis of your creditworthiness. The situation here is certainly unfavorable and now is not the right time to make new financial commitments as costs will continue to be high.

Profitability of the transaction from the owner’s point of view

Should you wait to sell? Apartments are still becoming more expensive. According to most analysts, housing prices will continue to rise in the near future. So, if you want to get a better price, you can delay the sale. Demand for real estate is still high. At the moment, there are no signs that the uptrend will stop.

This is true, among other things due to the suspension of the Bezpieczny Kredyt 2% program. Experts and representatives of the development industry expect a slower rate of price growth than last year, however, due to the large supply shortage and rising construction costs, rates will continue to rise. A decrease in real estate prices is not expected.

This is, of course, a beneficial situation for property owners, and they will not have to rush into the decision to sell.

Is it profitable to buy an apartment for the purpose of renting it out?

Renting apartments is still a potentially lucrative activity that can provide a fair return, although the attractiveness of this form of investment has decreased significantly compared to the situation two years ago. This is due, first of all, to the slowdown in the influx of visitors from Ukraine, and some of them even leave for their homeland. Last year, rental rates did not grow as dynamically as before.

Is it profitable to buy an apartment for the purpose of renting it out? The answer is still yes, although the supply of apartments for rent is increasing and rents are falling. According to NBP data for the 3rd quarter of 2023, the level of capitalization of rental investments in all voivodeship cities ranged from 6 to 7%.

Investments financed with a mortgage are slightly less lucrative, but central bank experts stress it is still a lucrative activity.

With the simultaneous improvement of financial conditions in terms of the cost of loans and newly concluded mortgage lending agreements, there was also a continuation of positive dynamics in the level of profitability, regardless of the level of their exposure to external capital, NBP analysts write.

Is it worth buying an apartment now?

The buyer's point of view is, of course, completely different from the seller's point of view. The answer to the question is yes, as there are many signs that apartment prices will continue to rise in the near future. Of course, the situation is not very comfortable for people looking for their own real estate on the primary market or an apartment on the secondary market. They are under pressure. High demand with limited supply and high construction costs lead to rising prices. This, in turn, offsets the positive effect of the recent reduction in interest rates by the NBP. If you want to buy an apartment quickly, you probably shouldn’t delay, because it will be even more expensive. If you don't need to buy now, you can wait, but no one knows when prices will start to fall.

An argument in favor of refraining from credit-financed purchases could be the expected further easing of monetary policy by the National Bank of Poland. However, there is no prospect that this will happen quickly. Subsequent decisions by the Monetary Policy Council have kept interest rates still high.

Selling an apartment and buying a new one: conclusion

The real estate market at the beginning of 2024 is a seller's market. Due to the high demand for apartments and limited supply, it is he who can dictate the terms. Buyers are under pressure. Apartment prices continue to rise, which offsets the positive effect of increased creditworthiness after the recent reduction in the NBP base rate. It is currently unknown what new government program will replace the Bezpieczny Kredyt 2%, which is being phased out. Depending on the structure of the program, this may contribute to increasing price trends. All this means that in the short term there is no room for falling prices and cheaper apartments.