What is the direction of the real estate market? Today, this question is often heard not only from the mouths of investors, developers, builders but also from tenants and buyers. After the crisis in 2008, the answer is not entirely clear. It is all the more important to closely monitor the situation and react promptly to changes. What is currently happening in real estate, developers, and banks? What facts can we currently work with?
Martin Šimurda from Bencont Development, Vladimír Lakatoš from Tatra Banka, Filip Žoldák from the real estate agency Herrys and Matej Jelínek from Atrios Real Estate accepted the invitation to an online discussion on the development of the residential market. The discussion was moderated by Peter Kysela from Atrios.
The number of flats sold did not change much due to the crisis. The reason is the lack of projects on the market
An analysis of Bencont’s residential market showed that the first quarter of this year was not affected by the crisis. Approximately 600 flats were sold and the market behaved quite standardly. The April and May figure already looked different, when the number of flats sold fell to 233. “In April and May, there were significant restrictions on the market. Banks did not operate in the standard mode, it was not possible to meet with clients and the conclusion of contracts also did not work in the standard mode. That is why we consider this number of flats sold to be very good “, Martin Šimurda analyzes the results of the survey.
The shortage of small flats is also reflected in the secondary market. According to the analysis of the secondary market in Bratislava by Bencont Development, only 32% of 2-bedroom apartments are available. More information can be found here.
The stock of flats has increased and there are currently about 2,000 of them on the market, which is a slight increase compared to the previous quarter. However, comparisons from 2013 say that it is still a very low number. “Thus, two months of the pandemic caused a slowdown in sales, but due to the lack of apartments and projects on the market, it did not cause any significant market turmoil. There was no massive drop in prices, as due to the non-existent offer, the price has nowhere to fall “, added M. Šimurda.
Both investors and ordinary buyers have begun to reconsider their investment plans. According to Matej Jelínek, however, we can already see that the market is reviving and we will soon get into similar tracks as it was before the crisis. “As a business, we can adapt well, and that’s the right way to deal with the crisis. In Atrios, we expect a slight slowdown and gradual stabilization of the market “, added Matej Jelínek.
The situation in real estate – a quick return after a sharp fall
In real estate agencies, the decline in the secondary housing market was more pronounced. In March and April, they saw a decline of about 50 percent in new contracts. “Based on the recommendation of the Association of Real Estate Agents, we postponed most of the transactions and from mid-March to mid-April we did not close any transactions. We also recorded an equally significant drop in demand, which climbed to 80% in new buildings, ” said Filip Žoldák from Herrys.
In the real estate agency, during the strongest impact of the crisis, they focused on recruiting new real estate into the portfolio and expanding the offer. This manifested itself in May when new closing trades reached a pre-crisis state on the secondary market, even higher. The same development can be seen in new buildings. “I must say that we are experiencing the” V “scenario when after a sharp fall there was a rapid return to normal,” said Filip Žoldák.
The rental price decreases in direct proportion to the interest in renting
The rental price decreases in direct proportion to the interest in renting The rental housing market remains in the hands of private investors. Until the preferences of Slovak buyers change from the need to own, there will be no change. “The development and preference of rental housing will not come because buyers want it, but because they will not be able to finance the purchase of their own housing,” thinks Matej Jelínek.
“Real estate agencies have seen a decline in interest in long-term leases during the crisis. People who lived alone terminated their tenancy and returned to live with their parents, for example,” said Filip Žoldák.
There was also a decrease in the average rental price. While at the end of last year the price of a monthly rent averaged € 700-750 per month, today it has dropped to € 500-600. People are interested in so-called economic rent. The question for realtors is whether this is a short-term decline or a long-term trend.
Will we take over rental trends from Western economies?
The rental housing market has also been the subject of debate among bankers for many years. “Most big players perceive that we should sooner or later move towards Western economies, where the rental housing market is developed,” adds V. Lakatoš. According to him, the question remains whether we will prefer a standard commercial rental system in Slovakia, which currently operates in Bratislava in a non-standardized and non-institutionalized form. What does it mean? You rent the property from the natural person who owns the property, not from the developer or the state.
The second option, according to Lakatoš, is to choose a path that works in Austria or Germany. In such a case, we would need legislation, because our laws do not enshrine the institute of cooperatives that manage rental apartments in these economies. “As an Austrian bank, we are well acquainted with this system, but it is still very remote in Slovakia,” says V. Lakatoš.
Harder access to mortgages will also affect the rental business
In the case of the classic rental apartment market, it is necessary to answer whether there is an institutionalized investor who would buy the entire development project and offer hundreds of apartments for rent. On the other hand, it is necessary to consider whether the economic reality will force consumers to look for a rental option. “We are slowly noticing this mental change in the younger generation, which does not need to own an apartment,” said Lakatoš. According to him, the motivator could also be the difficult access to mortgages, on which the NBS has been working for some time. “Even after years, the Slovak market did not get into a situation to create space for the massive development of institutionalized renting,“ Lakatoš concluded the question.
M. Šimurda also perceives this question. According to him, the economy does not want a rental business. The return on investment is still significantly longer when renting than when selling. According to him, the area of renting administrative premises will be interesting. Unleased office space is expected to grow, which may put pressure on finding ways to use it. According to Shimurd, this may be the motive that will create the rental market.