The coronavirus pandemic has reduced interest in travel, which is paid for by short-term homeowners and accommodation services such as Airbnb in addition to hotels. Also, they are not covered by State aid in the form of the COVID accommodation program, which aims to compensate for the loss from forced closure. Often, other uses must now be sought for accommodation intended for only a few days. What are the options for the owner and which pays off the most?
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Probably the most common solution is to change the rental period. According to data from professional portals, up to 45% of flats previously intended for short-term rentals have appeared in the offer of long-term ones since the spring of last year. According to the Czech Association of Private Accommodation Providers (ČAPUS), mainly those offered to foreign tourists have disappeared – in a year-on-year comparison, their offer decreased from 6,100 to 1,900 in October 2019. These flats should return to the market for foreign visitors in a year at the earliest, as follows from the analysis of the GarantovanyNajem.cz portal.
The increase in the number of long-term rental apartments was largely due to the decline in the average price per square meter. According to statistics from the Realitymix.cz portal, the rental price decreased by 11.3% compared to November 2019. In its analysis for the City of Prague, Deloitte states that the price per square meter is now around three hundred crowns. This is also confirmed by the owner of the Luxent – Exclusive Properties real estate agency Jiří Kučera: “Rental prices for the whole of Prague are around CZK 320 per sqm / month on average, before the corona crisis it was around CZK 350 per sqm / month. Further changes can be expected in the spring of this year when most of the currently concluded annual leases will end. However, in the current unfavorable situation, it can be assumed that a large number of these contracts will be further extended."
The main prerequisite for the transition to long-term leasing is to find suitable tenants. In addition to foreign clients, another large group that is currently not interested in renting is students. Due to distance learning at universities, the vast majority of them remain in their place of residence and thus do not need to find accommodation in Prague, for example. One of the peaks of the real estate season, which, thanks to this group of interested parties, usually comes in the autumn months, did not occur at all last year. Last but not least, there are also fewer foreign employees of multinational companies, who returned to their home countries or companies during a relatively large part of the pandemic. „For those interested in renting, the layout currently plays a role in the decision-making process. Smaller flats are mostly requested by young working individuals or couples, the larger ones by families with children, „ explains Jiří Kučera from Luxent – Exclusive Properties, adding: “Relaxed luxury flats in the center of Prague are mostly fully equipped, due to their earlier use for short-term rentals. Those interested accept this condition and prefer the equipped interior even in the outskirts of the city.“
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However, some short-term rental properties require an adjustment to make them suitable for full-fledged housing. You can use the time caused by the loss of rent just to reconstruct the building. It is worth considering investing in an apartment, especially in the kitchen. The lines in typically short-term rented flats are usually smaller so that they are sufficient only for the most necessary cooking. But a mother from the family will rather appreciate more cooking hobs and a larger worktop. The question, in this case, remains whether the owner has sufficient financial reserves, which in this case he could invest in housing adjustments.
The most radical option is the sale of real estate. The investment in an apartment for rent is not small and some owners have financed it with a mortgage, for example. They are now unable to repay without a regular monthly rental income. But there is no danger of a lack of applicants. „The demand for apartments to buy in Prague is not declining in any way. In the long run, a huge number of them are missing and this deficit is not decreasing, bureaucratic barriers are preventing new construction. They will therefore continue to be absent and it is indifferent whether their buyers will be their future users or the investors who will lease them. Rental prices and sales prices will gradually rise,“ says Jiří Kučera, adding: „The further development of the situation with the spread of Covid-19 will suggest how the rental market for previously rented flats will change. The former form and scope of use of Airbnb platforms will not return for several reasons. On the other hand, it is only a small part of the rental market.“
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If you are unsure about the current situation, consult an expert. Luxent – Exclusive Properties specializes in the luxury real estate segment. It provides its clients with a comprehensive service from financial and investment advice through the determination of the market price, presentation, and inspection of the property to the settlement of all official requirements and the actual implementation of the sale. It also offers rental housing services – ie all related services, including, for example, property management. Therefore, if you are hesitant between short-term and long-term rental, brokers can, thanks to their years of experience and market orientation, be able to advise you on the most suitable solution.
Source of the cover photo: https://www.pikrepo.com/…-aerial-view
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