Renting Your Home Will Get More Expensive: Watching for a Rise in Divorces and More Difficult Loans

Inappropriate ads appeared during the first quarantine

Jurgis Vilutis, head of the rental manager Valdantis, which belongs to the Rent Vilnius group, recalled the real estate rental situation during the first quarantine at the Investu seminar. In the first weeks of March, before the quarantine was announced in the country, massive cancellations of short-term rental reservations began. It is estimated that about 70 percent were canceled. rental reservations.

“After panicking about short-term rental, the owners tried to rent a house for a long-term rental at any price – inappropriate ads appeared with 25 percent. Discounts. Such apartments, suitable for short-term rental, they are generally located in the city center. March and April. The rental market was difficult because it was full of short-term rental housing, “says J. Vilutis.

He also shared the Rent Vilnius experience: “At that time, we had 10 apartments for rent, we rented one for the first month and the remaining nine for the first two weeks of the second month. Until the whole mass of cheap apartments came out, long-term rent was stagnant. During that period, there was little panic about what will happen: rental prices will either fall or remain. We had to decide whether to discount and it was difficult to show the apartments. “

Several problems arose

According to J. Vilutis, employees in the construction sector had two problems: one could have gone abroad back home and the other had the opposite problem. At the beginning of the quarantine, shops and supermarkets were closed, materials could not be purchased, and no construction took place.

“Belarusians and Ukrainians who come to Lithuania and work have faced a strange situation: they did not have the money, because they normally receive a salary every week or two for the work done. Without money, they still had to pay rent, food etc. Construction organizations are very ugly, but they have “bulldozed” this place, he says.

Therefore, as the Managing Director pointed out, several problems arose: the cheap apartments were vacant when the residents left and the remaining tenants were unable to pay their rent.

J. Vilutis identifies distance education for students as another major blow to the real estate rental market.

“After the quarantine was announced, it became clear that the studies would be carried out remotely, so most of the students went to their parents. No matter how they had to pay the fines, they terminated the contracts,” he says.

How rental prices changed in Vilnius and Kaunas

Užupis is a district that was separated in Vilnius during the first quarantine. A large number of new luxury apartments have appeared in this district, so the rent has increased considerably. Both in the central part and on the outskirts of the city, the prices reportedly remained similar.

“In Vilnius since 2017. 6-8 percent per annum. Rental prices rose in May, but in May, due to the spread of the coronavirus and fear, the appearance of a large number of apartments on the market and the departure of students and builders, prices in Vilnius fell by 6.4 percent. At that time, comparing October this year with the same period last year, the price of real estate recovered and became more expensive by around 1% “, Rent Vilnius manager mentions changes in rental price in Vilnius.

At that time, the situation in Kaunas was different, not only the price increase, but also a fall, for example, in 2019. Rental prices fell by 2.5% in Vilnius, while they grew by 8.2 %, and during the first quarantine in the spring, rents in Kaunas increased by 1.4%.

“Last year, rental prices in Kaunas were reduced by prices that had risen much earlier. New projects appeared and they were not rented as they wanted. The rental market in Kaunas is not as strong as Vilnius. Perhaps the biggest influence is he worked in the student sector when Eika built his dormitories, ”says J. Vilutis.

Tenants tried to avoid fines

The speaker also shared the experience of Valdantis: “We lost 90%. students, some returned in the fall, we filled all the places completely. The beginning of September was the largest signing of contracts, when it used to take place in early August, because it was not clear whether there would be distance or normal teaching in universities.

Foreigners who work continue to rent. We were afraid that those with good jobs in Lithuania, for example in the field of information technology, would travel to their home countries to work remotely, but this did not work. Some left but have now returned, booked apartments and some have received discounts. Of our 85 managed apartments, only 8 tenants (about 10%) applied for discounts, some received temporary discounts. “

He also points out that all the students and other tenants who terminated their leases during the first quarantine tried to avoid fines for Force Majority reasons, but to no avail: “We have received clarifications from the lawyers that the Force Majority did not applies in this area. We are still pursuing some cases, but we see that we will win. “

What is happening now?

Speaking of the current situation in the rental market, J. Vilutis points out that short-term rental apartments have “diluted” the long-term rental offer: a large number of new apartments have appeared on the market. Workers from third countries also left, and many low-cost apartments were left empty. Furthermore, the number of Erasmus students and other foreign students in Lithuania decreased.

According to J. Vilutis, the real estate sales market currently recovered about 25-30 percent. The apartments are bought for rent. And apartment rental listings fell by a quarter compared to the same period last year.

“That means that we had to have many apartments and the rent had to be drastically reduced, but today we have the opposite situation – all apartments are rented – both expensive and cheap, and even in the ads there is a quarter less than last year. ”Says Valdantis. guide.

Bank financing for housing has been restricted

This situation can be affected by the tightening of bank loans to young families trying to buy their own home.

“Tightening does not mean not giving a loan, but taking a closer look at family finances. The request appeared in May, it was divided by districts: if you buy in the old town, 15 percent is enough. Initial deposit, but if you buy in Perkūnkiemis, you can ask for 25%. initial contribution. Many people, fearing for their future, their job and their income, decided to rent a property instead of buying it, “says J. Vilutis.

Lithuanian students, who were less inclined to study abroad due to the pandemic this year and therefore remained in Lithuania, also contributed to the recovery of the rental market.

“We have also noticed a significant return of emigrants, among them we see two flows: some are determined to return here permanently, so they buy real estate themselves, other emigrants prepare to wait for the wave of coronavirus in Lithuania, rent for two or three years, generally with an average lease term of one year. ” says the rapporteur.

The number of divorces is felt in the rental market.

The rental manager notices another interesting trend: the increase in the number of divorces is also being felt in the real estate rental market.

“Men leave apartments or houses for their ex-wives and go out to live alone. This trend became apparent in May-June, when everyone was closed and had to stay together for a month or two. From our experience, we see that he contacts us and asks if he can rent for half a year before standing up. We ourselves have noticed the increase in the number of divorces ”, explains the director of Rent Vilnius.

Among other things, people in the regions are moving to the big cities in search of work: “Wages are even lower in the regions, employers are now cutting jobs in difficult times, there are no more job opportunities in the regions. , so people are moving to cities to find work here. Since he doesn’t have real estate, he rents it out ”.

Next year, rental prices will go up a small percentage

J. Vilutis anticipates that summer rental prices will remain unchanged or will rise as much as 3% until next year, and starting in August. prices should start to rise 5% on average. by year.

“Such forecasts on the financing of banks to acquire real estate – it is difficult, the income is no longer so secure, many people have lost their jobs or changed it, they will no longer be able to acquire real estate, but they will have to rent. In addition, many people consider real estate as a safe haven, today they buy anything and anywhere, that’s why the price of real estate increases the price, ”he says.

The rapporteur considers that property prices should fall if developers continue to develop objects with great force. However, the development of new facilities today is stagnant. “Banks will not issue many loans, but there will not be so many objects to develop,” he says.