Short term, mid term and long term rentals, how the rental market is changing worldwide and which scenarios are worth considering in Kraków

Short term, mid term and long term rentals, how the rental market is changing worldwide and which scenarios are worth considering in Kraków

The residential rental market is going through one of the biggest transformations of the last decade. Short term tourist rentals, which until recently were synonymous with easy income and high investment returns, are today under regulatory pressure in almost every large city in the world. At the same time new models are appearing, such as mid term rentals, which are attracting both investors and a new category of tenants. For anyone thinking about an investment in a rental property, this is a moment when it is worth carefully understanding the current context.

The most is happening in the segment of short term tourist rentals, known mainly from platforms such as Airbnb, Booking, Vrbo and local counterparts. In Barcelona the city authorities have announced the complete phasing out of this type of rental in apartments by 2028, arguing that residential tourism pushes out residents and dramatically raises rents. In Paris there is a 90 day annual limit for renting out a primary residence, and penalties for exceeding it reach tens of thousands of euros. In New York the 2023 regulations have practically eliminated classic Airbnb in many districts, as they require the host to be present in the apartment during guest stays. In Amsterdam day limits and a registration requirement have been introduced. In Lisbon the city hall has suspended issuing new licenses in central districts. In Berlin strict rules apply regarding the change of use of apartments to short term rentals.

In Poland regulations are still milder, but the topic is becoming louder. In Kraków streets and districts such as Stare Miasto, Kazimierz, Stradom and parts of Grzegórzki have reached a level of saturation with short term rental apartments at which local residential communities are increasingly protesting. In Warsaw a similar phenomenon is visible around Plac Zbawiciela, Powiśle and Stary Most. The municipal authorities of several largest cities have announced public consultations on possible restrictions, including mandatory registration, day limits and higher tax rates. A strong signal also comes from increasingly frequent decisions of housing cooperatives that introduce bans or strong restrictions on short term rentals in their own internal regulations.

For investors this means a new reality. Short term tourist rental can still be very profitable. At the peak of the season in Kraków a well managed apartment in the center can generate 200 to 400 percent more revenue compared to classic long term rental. At the same time it requires significantly more work, involves greater wear and tear on the apartment and increasingly greater regulatory risk. A decision about this form of investment should today take into account a scenario in which in 3 or 5 years local authorities or the housing community will introduce significant restrictions.

Mid term rental, meaning leases of 30 days to 6 months, is becoming an increasingly interesting alternative. It is addressed to digital nomads, professionals on long term assignments, resident doctors, exchange program students, athletes during a season, patients undergoing treatment at specialist clinics and people who are just relocating to a new city and want to first see if they want to stay longer. The average rent is higher than in classic long term rental, usually by 30 to 60 percent, but lower than in short term mode. In return the investor gains stability, less wear on the apartment and significantly lower regulatory risk. Platforms such as Blueground, Habyt, Spotahome, Flatio and local portals specializing in mid term rentals are gaining popularity in Kraków, Warsaw and Wrocław.

Long term rental remains the foundation of the market, especially in the family segment and in institutional rental managed by funds. The rate of return is lower, usually from 4.5 to 6.5 percent annually, but stability and minimal management requirements make this the choice of many investors who value peace of mind.

What is worth considering before investing in a rental property? First, location. An apartment in an attractive location can successfully move between all three models, short, mid and long term, depending on the owner’s needs and the market situation. Second, check the current local government regulations and the rules of the housing community, as some communities already today have a ban on short term rental in their internal regulations. Third, assess the demand for each form of rental in a given district. Around universities, specialist clinics and large business centers the demand for mid term rental is often high. Fourth, calculate costs and revenue under different scenarios. Fifth, management. Short term rental is practically a full time job, mid term requires significantly less effort, and long term tends to be almost passive.

In Kraków the most attractive locations for different forms of rental differ significantly. For short term tourist rental the best zone is Stare Miasto, Kazimierz and the surroundings of Wawel. For mid term rental targeted at professionals the areas around Rondo Grunwaldzkie, Salwator, Ruczaj and the vicinity of the university hospital work very well. For long term family rental Bronowice, Krowodrza, Podgórze, Grzegórzki and Bieżanów perform best. This is a significant simplification, but it gives an idea of how important the choice of location is depending on the strategy.

At Eternel we help investors understand this increasingly nuanced market. We combine knowledge of local specifics, current regulations and global trends with individual analysis of each offer. For our clients this means informed investment decisions that combine profitability with safety. Spring is traditionally a good moment to begin conversations about a new investment, because the supply of apartments is growing and buyers gain slightly better credit conditions.