Those who have been looking at advertisements offering rental housing in recent weeks may have been pleasantly surprised. Although prices were still rising at a double-digit rate every month in September and October, they now – it seems – have hit their ceiling, at least for a while. Moreover, prospective homebuyers are getting a deal with a landlord significantly faster and more successfully than in early autumn. According to Jan Škrabánek, the head of Bezrealitka, the largest domestic digital real estate service, we cannot bet on stagnation or a further decline in rents next year. It is possible that the market will not be so crowded anymore.
At the beginning of autumn, there were only two regions where rents did not grow at a double-digit rate. In Prague and the Ostrava region, rents even increased by almost a fifth year-on-year, while in Brno and the Central Bohemian Region by a full 12%. In addition, the rising utility and energy costs had to be added to the increase in total housing costs. The cost of living for households in rented accommodation rose by leaps and bounds. In addition, there was a queue of dozens of applicants for each rental apartment, which allowed landlords to further increase prices when negotiating.
By the end of November and the beginning of December, however, the situation was much calmer and in the largest markets the growth was either very moderate (Prague by 3% compared to the beginning of autumn, Brno by 1%) or even slightly decreased – in Ostrava by one percent, in the Central Bohemian Region by three percent. However, there were also much bigger drops – for example in the Pilsen region by 10% or in the Liberec region by 8%. However, as Jan Škrabánek points out, this does not mean that rents have hit their ceiling in the long term.
So why are prices turning around?
There are several reasons for December’s price reversal – partly due to lower demand as the year drew to a close. At the same time, however, Czech households have plenty to choose from again after lean months. The supply has increased significantly and the number of buyers for individual listings is in many cases a quarter of what it was at the beginning of autumn.
Houses and flats left by Ukrainian refugees have started to return to the offer – the owners have decided to continue to offer the formerly temporary housing for rent, which they did not do before. At the same time, flats bought as investments in the spring of this year have been added to the offer. Mostly after they had undergone renovations. At the same time, higher rental prices motivated many owners to offer properties on the rental market that they had previously only had for their own use or were lying fallow.
“And a category of ‘Norwegian rentals’, i.e. living or co-living spaces, has also emerged, supplementing the supply, especially in the regions. Most often, these were single rooms in large apartments, floors of family houses,” Jan Škrabánek mentions. “However, there are also leases of garages, cellars or other non-residential premises provided for business purposes. Mostly with the same goal: to reduce the rising cost of living for their owners and to cover rising energy prices.”
How next year?
As mentioned, prices cannot be expected to fall in the long term. They are likely to rise by at least the rate of inflation – otherwise it will lose economic sense for owners to rent. On the other hand, supply will become significantly more financially stratified – developing both at the level of expensive rental housing for the upper middle and upper class, and for renters looking for the best price relative to location.
“The most expensive apartments will continue to be for Czechs who already take renting as a lifestyle. They have no problem paying extra for housing, but they want clear quality. That is, a renovated, presentable and well-managed apartment in a great location. This, by the way, will open up new opportunities for, for example, management companies,” believes Jan Škrabánek.
The second category will be formed by ordinary flats and more and more often also by houses of owners who will consider renting more as a way of paying off their own living costs or their own mortgage. Their prices will follow the rate of inflation and energy prices.
“The third category will be low-cost flats. Most often in the form of the aforementioned co-housing. This will be aimed at all those who want to live in the city centre but do not have the possibility to pay full rent,” explains Jan Škrabánek. “In Prague and partly also Brno, this category is one of the fastest growing, although there are not yet as many of them on offer as is common in Western metropolises, for example.”
Ideal position to respond to the challenges of the current market
The rental market is also revealing what its new standards will be. Landlords are significantly more cautious and viewings often start to resemble job interviews. It is not uncommon for a landlord to want proof of, for example, a certificate from an employee or being debt-free.
“A lot of owners – especially those from individuals – are not primarily after price. They are willing to discount when the tenant is trouble-free and will pay long-term. Logically, just one month of failure is problematic for their pricing policy,” mentions Jan Škrabánek. “Also in this respect, prospective tenants should take, for example, the requested confirmation from employment as a competitive advantage rather than a thing that should offend them. It’s logical, after all – no one wants to end up with unpaid utility arrears after a tenant has suddenly moved out.”
After all, this is one of the reasons why tenancy agreements are being renegotiated even where they were previously “dog-eat-dog” agreements. For example, in leases between acquaintances, friends or even relatives. According to Škrabánek, the fact that most contracts can be easily signed digitally is also an impulse. Bezrealitka’s figures prove this: interest in their digital rental contracts has been growing significantly in recent months.
Source: Bezrealitka
