Representatives of different companies engaged in real estate development discuss what reasons could have led to the sharp increase in the number of apartment rental advertisements.
The growing number of long-term apartment rental ads – a reflection of the growing need to buy housing for investment?
Every year, the months of August-September are probably the most active in the housing rental market of the year. Smaller apartments and studios in the city center and near universities are becoming particularly popular for rent. However, the increase in the number of students in cities is not the only reason why there could be an increase in housing rental ads.
Rasa Radovičienė, manager of sales projects of the real estate development company “Lithome”, says that the increase in the number of apartment rental ads in the country can be related to various reasons that depend on economic, social and demographic factors.
“When property prices rise, many people find it difficult to afford a home, so they choose to rent.” This increases the demand and consequently the supply in the rental market. At certain times of the year, such as autumn, when many students return to the cities for their studies, the number of rental ads naturally increases. Also, at the end of summer, when the vacation season ends, the rental market is more active as people look for new places to live.
The economic situation in the country also affects the rental market. If household incomes rise more slowly than property prices, more and more people may choose to rent as it becomes a cheaper option than buying a home. The impact of the pandemic on the economy could also encourage people to reorient themselves to the rental market”, says R. Radovičienė.
True, the growing demand for housing for investment (rental) in new Lithome projects According to R. Radovičienė, it is not observed. The trend of purchasing housing for investment (rental) is currently influenced by various factors.
“We observed the growing demand a few years ago, when housing prices were much lower than they are now. Real estate prices in Lithuania have increased significantly over the past few years, especially in Vilnius and other big cities. Rising prices mean new investors have to pay more for housing, but rents haven’t grown as fast. This lowers rates of return because the initial investment is higher and rental income does not always grow proportionally.
Another factor behind the decline in buy-to-let investment is that rising interest rates are driving up the cost of loans for homebuyers. This further reduces profitability, as part of the rental income must be used to repay the loan. In addition, higher interest rates deter new investors from buy-to-let properties, as rental returns often do not cover loan payments.
For some investors, renting a house has become less attractive because more profitable alternatives have appeared, such as investing in securities, which is currently more attractive than renting a house, which currently offers a small return,” says the head of sales projects at Lithome.
When the interviewer was asked whether the increase in the number of long-term rental ads could be due to the abandonment of Airbnb and other short-term rental platforms (in the beginning, the coronavirus had a negative effect on this area, now the tourism sector is affected by the ongoing war in Ukraine), R. Radovičienė assures that the increase in the number of long-term rental ads is indeed may be due to the abandonment or reduced use of Airbnb and other short-term rental platforms after the pandemic, when the tourism sector was severely affected.
“The war in Ukraine and geopolitical instability continue to reduce the number of tourists, which has a negative impact on the short-term rental market. The owners, unable to obtain sufficient income from short-term rentals, choose long-term rentals as a more stable source of income. Rising interest rates also encourage homeowners to choose long-term leases that provide a more consistent income stream. Long-term rentals offer more consistent income and less risk than short-term rentals, especially in adverse economic conditions.
Growing interest in alternative housing models, such as co-living or smaller apartments, may also contribute to the growth of long-term rentals. Owners invest in specific projects focused on the rental market, which are tailored to the needs of tenants and provide higher investment returns through stable long-term leases. Thus, many factors contribute to the transfer of housing for long-term rent: from regulatory and market changes to remote work trends and the stability of the rental market”, concludes R. Radovičienė.
Alternative housing models are attractive
Growing market segment – alternative housing models. There are cases in the market when the whole house or its part is purchased for rent. Exclusive and developed in Vilnius, Naujamiestis district Corner projectwhich is unique in that the property purchased in it can be automatically “employed” and receive constant passive income without any additional actions of the owner.
“A hotel is already actively operating in the project, so with the owner’s consent, the property can be rented using the hotel’s rental service. Such an investment model is new in Lithuania. In the Corner project, the apartments are sold fully furnished and decorated, so they are suitable for hotel work immediately. Of course, apartments can also be purchased for your own needs. This project is intended for buyers who invest in property for long-term and short-term rent or are looking for affordable housing for themselves in the city center,” says Dans Slavinskas, Corner’s sales manager.
Personal album photo/Corner sales manager Dans Slavinskas
Does such a project attract rental (investment) buyers who can contribute to the growing number of housing ads? According to D. Slavinskas, since the start of sales, apartments in the “Corner” project have been purchased by both investors who want to receive passive income using the hotel rental service, and buyers who are looking for an inexpensive, functional home for themselves.
“However, the majority are investors who buy from one to a dozen apartments to generate passive rental income. We continue to feel great interest in the project, we are happy that investors appreciate the convenient, liquid and very promising location of the hotel, the renovations of the interior of common spaces and apartments, and attractive prices”, says D. Slavinskas.
Corner’s sales manager seconded Lithome’s sales project manager R. Radovičieni, stating that the number of rental ads in the country can grow for various reasons.
“For example, due to the increasing number of investors who buy real estate for investment, due to the purchase of a larger second home to live in while renting out the first home. Also due to emerging alternative rental options, such as “co-living”, where some tenants move to more attractive housing. Seasonality can also have an influence, as well as the fact that foreigners who came to Lithuania in the last two years from the East bought their own housing or left the country”, says D. Slavinskas.
There is an increase in the activity of buyers seeking to purchase housing for rent
The fluctuating housing market in the country does not deter some real estate buyers from buying homes that are then rented out for a longer period of time. Edvinas Malevskis, the head of one of the largest real estate developers in Lithuania, Rewo, says that the demand for rental housing is not decreasing, which can probably lead to an increasing number of housing advertisements.
Personal album photo/Rewo manager Edvinas Malevskis
“We and institutional investors are satisfied with the demand for apartments for rent in Vilnius, which we have no doubt will be more and more active in this market.” Back in 2022, together with the Estonian investment company “EfTEN Capital”, we agreed on the acquisition of a part of the real estate project “TALINO” in the Justiniškiu micro-district. The first phase of the project in Vilnius, which includes 145 apartments, has been transferred to the fund.
They were offered Vilnius rental market already in July of this year and successfully rented out. This is so far the largest transaction of sale of residential property to an investment fund in Vilnius, and we have no doubt that it will not be the last.
E. Malevskis says that he feels the increasing activity of buyers in the primary housing market. “This is related to the stabilized housing prices, as well as the decreasing base interest rate in the country. The latter factor has a positive effect on buyers who purchase apartments as an investment for rent. We really feel their activation. We expect these positive trends to continue and allow the primary market to return to its normal rhythm.
We constantly monitor the market situation and respond to it. When planning projects, we take into account the needs of all potential buyers, including investors. As we mentioned, we feel their interest growing. We are also continuing our discussions with institutional investors. In the next 4-6 years, we will offer 2000-2500 apartments to the market. We hope that 20-25 percent of them could be purchased by buyers of this type – individual or institutional investors”, says manager E. Malevskis.
In conclusion, the growing number of long-term rental ads reveals the impact of both economic and demographic factors on the rental market. Rising home prices and interest rates are reducing profitability for investors, making long-term rentals more attractive to both investors and homeowners looking for stability.
Geopolitical uncertainty and declining tourist numbers are also encouraging long-term rentals as a more reliable source of income. In addition, alternative housing models such as co-living or automated rental in hotel projects reflect changing market needs and provide additional opportunities.
Those who want to follow real estate trends should take a look at new housing projects and solutions at Aruodas.lt in the new projects sectionpresenting the latest real estate projects and real estate innovations and perspectives emerging on the market.
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#rise #longterm #rental #listings #reveal #Business
E apartments for rental purposes,” he states, indicating a clear trend towards investment in rental properties.
The real estate landscape in Lithuania is evolving rapidly, with long-term rental options gaining prominence as investors seek stability amidst uncertainty. The combination of geopolitical factors, shifts in market dynamics, and changing consumer preferences are revolutionizing how and where people choose to live.
As for the alternatives to traditional housing, models such as co-living spaces are fostering a sense of community and addressing the needs of modern tenants looking for more flexible living arrangements. These developments not only cater to the demand for affordable housing but also attract a variety of buyers, from individual investors to larger institutional entities.
the market appears to be responding positively to these trends, with developers like Rewo and projects like Corner standing at the forefront of an evolving landscape that increasingly favors long-term rentals and innovative housing solutions. The sentiment among industry leaders suggests optimism about future growth in the rental market, as housing needs continue to diversify in response to economic and social changes.
