Buying apartments for rent on loan may have trouble, but economists do not see tragedy Business
At the end of 2015, Inga took out a loan for a second home and bought an apartment in Pervalka 15min understand that since then engaged in short-term rent. According to her, the funds, look for received from vacationers, covered part of the loan payments, in addition, it is important that they allowed to review and choose housing.
“Before each season, certain works need to be done, to do it, those works cost money. I was really very angry when the accommodation ban was announced. “There is no idea how many people provide accommodation: one is Radisson and the other is a hut somewhere between forests and meadows,” she said.
True, although Inga said she had no income in April, she expects a recovery from the second half of May.
“I’m going to start renting, there are people who are just on vacation for the longest time. And now we cover the loan from salaries, “she said.
The consequences will be felt when buying a home with a loan
Audrius Šapoka, CEO of Ober-Haus Real Estate Services, estimates that about 15-25 percent, later from a specific new future project, was sold to those who bought the property as an investment. In his view, the new reality entrusts more strongly those who have a bank loan bought housing for their own needs and whose personal or family pajamas and immediate professional prospects were affected by quarantine, rather than the second or third home buyer.
“The market share of such individual investors has always been significant, but has never been one that has fundamentally disrupted the housing market. Not every buyer bought a house for rent with a bank loan, some of them do not seek to take the maximum bank loan, although they have the opportunity to do so, so the lack of long-term liabilities in their pajamas is less sensitive than likely to buy fell sharply. In addition, the pandemic and quarantine of all tenants’ pajamas are far from working, “he assured.
Photo by Ober-Haus / Audrius Šapoka
According to A. Šapoka, those people who are considering buying a home with the aim of renting it, are postponing such ideas for a later time.
“This does not necessarily mean that they abandon these decisions, but rather postpone them until the situation is clearer, so it seems that their relative share will again be the calculation of transactions should be lower for now,” he says.
Will switch to long-term lease
Šarūnas Tarutis, Investment and Analysis Manager of Real Estate Development Company Citus 15min explained that their company is mostly bought by those who plan to rent apartments for long-term rent. As a result, he asserts that he has not heard much concern from customers so far. However, it is noted that the demand for short-term rent is currently likely to be close to zero.
“During the quarantine, due to the complete stop of tourism and other restrictions on movement, short-term rentals became completely irrelevant. Some people who do it are likely to try to switch to long-term rentals, at least for a short time, to reduce losses at least to some extent. I think they will expect the end of the quarantine as soon as possible and want to be in a more profitable short-term rental segment, so they will offer the shortest terms, such as a few months, and this can be attractive to tenants, ”he said.
By the way, the analyst notes the fall in rental rates. 15min announced that the first swallows were seen in the apartment rental market in the capital. Part of the entrepreneurs engaged in short-term renting, seeing the silence, offered the market to rent apartments for a longer period. According to experts, the price correction can already be observed in Vilnius Old Town. It is now offered to rent apartments for 400 or even 300 euros.
“Decreased flows of travelers and holiday passengers will push people engaged in short-term rentals into the long-term rental market, and supply will increase even more. This can understand price criticism in this market and, in the short term, reduce the attractiveness of real estate as an investment.
On the other hand, real estate is and will always be one of the most attractive and safest investments. Real estate has not only returns but also long-term value gains. As a result, even with lower returns, the demand for housing investments will remain, ”he assured.
The effects can be individual
According to Swedbank’s senior economist Vytenis Šimkus, it is the short-term lease that deals with individuals and must first feel the consequences of quarantine.
“With the disappearance of tourist flows, owners who view their apartments via Airbnb or other platforms are looking for alternatives to generate at least some pajamas from their property. In particular, it will negatively affect long-term rental prices, which have already come under pressure. If the situation continues and the population seeks to get rid of additional housing quickly, it could create additional pressure on housing prices, ”he believes.
According to V.Šimkus, if an investment home was purchased with financial leverage and it no longer brings income, it becomes a burden. While responsible lending rules should prevent people from making excessive commitments and existing buffers should be more serious in general, individual cases can vary.
“Especially if the income of specific people depends entirely on sectors of the economy that are completely closed. Due to the emergency situation, all commercial banks are formed due to outgoing credit holidays, so residents who face disadvantages should turn to their bank and take advantage of such an opportunity, ”he explained.
Many buy apartments for rent from their own funds
Meanwhile, Tadas Povilauskas, an economist at SEB Bank, is a bit calmer. According to the data of the Bank of Lithuania and the Center of Registers, the share of housing in Lithuania for skirt rental is about 20%. total housing stock. According to him, various surveys show that about 10 percent. up to 10% of households live in rented housing at a market price. live in relatives ’homes, so surveys confirm that up to 20 per cent. all housing is for long term rent.
“Very often the second home you own is either inherited, or you will simply take out a loan to buy only one of the few homes you have,” he explained.
According to T. Povilauskas, the data of the last three years in Vilnius show that although up to a third of new apartments are purchased for investment purposes, a large part of such transactions is financed with equity funds. Meanwhile, only one in four investors borrow. A significant proportion of such purchased housing was directed to the short-term rental market. It is estimated that there would be more than 2.5 thousand such dwellings in Vilnius at the beginning of this year.
“Holders of a home loan for the purchase of the main home who have also taken out a second, third or fourth home loan financed by housing for long-term or short-term rent have very few opportunities with households with a single home loan, as only a small population has such pajamas that allow you to service multiple future loans as well as allow you to pay more of the higher required down payment. In addition, often residents who have their own home without a loan or have already repaid it, take out a new loan to buy a basic home, and simply rent the old one, ”he assured.
Saving for a black day will survive
Vaidotas Šumskis, an economist at the Bank of Lithuania, emphasized that buying a loan with a loan is a risky activity, therefore banks are demanding a higher initial contribution when buying second and subsequent homes.
“Currently, housing rents are falling in price, and the income of landlords is also declining. In some cases, homeowners may lose all income from renting a home, ”he said.
A.Šumskis explained that before starting to invest, the Bank of Lithuania recommends that every inhabitant have a “black pillow” – to accumulate funds that would be enough to cover at least 6 months of expenses. And in the case of income that tends to fluctuate significantly, even more so.
“Those investors who have such a reserve have, this period of uncertainty is likely to survive without serious solvency problems because the interest payments on loans need not increase significantly in the near future. If the measures to implement the measures to combat the coronavirus pandemic are currently being implemented and the pandemic does not last long, the uncertain economy will gradually shrink and demand for rent will start to pick up again, ”he said.