The number of apartments on the market is still growing, but those used as Airbnb rentals are not as attractive
Due to the ongoing pandemic situation, the number of vacant flats is growing rapidly on the market. In most cases, these flats have been used for short-term rentals via the Airbnb service. The owners cannot rely on the promise of a brighter future and started to offer these apartments for long term rentals as well. During the first pandemic wave, after a long time, the supply exceeded the demand. With that, real estate prices have started to drop, and this trend goes on. Living in the city center has thus became more affordable for many Czech people.
Big losses and entering stock market
According to AirDNA analytics, (accommodation price comparing tool) Airbnb sales in US urban locations such as New York, San Francisco and Seattle, dropped by more than a half. In the third quarter of this year, the company generated revenue of $1.34 billion with a profit of approx. $220 million. For the first 3 quarters of this year, the company’s net loss was of $697 million with revenue of $2.52 billion.
Despite the loss, the company is about to enter the NASDAQ stock exchange. The shares will be traded as ABNB. The company can raise $2.6 billion in capital, up to 51.9 million shares should be available to purchase on the stock exchange.
Airbnb has laid off 25% of their staff
In May this year, Airbnb’s CEO announced that the company had to lay off 25% of their staff. Following the redundancies, the company had to let go of several new projects, including transport and entertainment investments, in order to focus on the company’s driving force - accommodation.
"People do want to travel, they just don’t want to get on planes. They don’t want to stay in big cities as often as they used to. They don’t want to stay in crowded hotel areas. They want to get out of the house. So we think that the demand will grow. In fact, I am very optimistic about the future of our industry,“
stated Brian Chesky, Airbnb founder.
Safety measures against covid-19
Airbnb hosts around the world must follow the updated Covid-19 safety and hygiene measures to provide their guests a peace of mind when travelling. These are the new safety standards (face mask wearing, social distancing, better cleaning procedures, disinfection) and all hosts have been asked to commit to these new standards by November 20, 2020.
Tourism at the point zero
In Czech Republic, some short-term landlords kept their apartments after the first wave of the pandemic, hoping that the situation would improve eventually. But their hopes were crushed during the summer, as the big cities remained empty. Tourism fell to the point zero, landlords gave up at last and were forced to offer their apartments for the long-term renting. The pandemic also significantly affected the thinking of potential buyers.
No interest in Airbnb apartments
It may seem that the situation would help those looking for a new housing. However, tenants are not interested in Airbnb rentals so much because of their concern of what would happen when it became possible to travel abroad freely and tourists started coming back once again. It is therefore necessary to negotiate the contract with the landlord thoroughly, in order to avoid such situations.
We asked real estate experts about the current real estate market situation
"The pandemic is changing the new housing requirements. People now want a really good product for their money, the emphasis on quality is now even bigger than before. On top of that, after the quarantine experience, there is a growing interest in larger flats with balconies, houses with gardens or apartments with front gardens,"
explains Crestyl sales director Viktor Peška for LP-Life.
Elena Jakubovič, the founder of Y&T Luxury Property, talks about the decline of interest in Airbnb accommodation:
"I don’t believe there is any resurrection for the Airbnb apartment market soon. Covid-19 is not the only reason, there are also the city districts and the Owners Association which are strongly against short-term rentals. Nevertheless, the decline in demand from tourists has its bright side, too – it’s quiet in the city center. With rents having fallen to where they were in 2016, many Czechs can now afford to rent an apartment right in the center of Prague. A 1-bedroom apartment in Prague 1 district will cost approx 20.000 CZK, a 2-bedroom approx. 30.000 CZK. It is clear that the Airbnb owners are still waiting for the market to change, offering to rent their apartments for a period of 1 year, as is obvious at Prague 1. The number of the apartment sale ads increased by 30% compared to March 2020 whilst the number of rental apartments has doubled to 1,499 apartments. 70% of them are mostly studios to 2-bedroom flats,"
Radek Polák, Trigema spokesperson, can confirm:
"The monthly rent of apartments originally used for short-term rentals is often lower than the market average price. According to the information we hold, contracts with these tenants are usually closed for a period of one year. Once the year has passed, if the situation returns to normal at least to some extent, and tourists start coming back here, there is a risk that a portion of these apartments will go back to the segment of short-term rentals again,"
Radek Polák states.
Prague became more expensive to make up for losses
At the end of June, the average daily rates were lower by 14% compared to the year before, but this changed in August. The owners felt a chance to make up for their losses and properties became significantly more expensive. But the situation did not last long and everything is beginning to return to the very spot where it was in spring. The prices are dropping significantly, which has also affected the average rent price in the entire Prague – they dropped by 15-20%.
For a studio in Kampa or near Wenceslas Square, which would normally cost around 18,000 CZK a month, you can pay around 10,000 CZK now. The biggest drop was seen in less attractive locations, such as Malá Chuchle, Lipence or Benice. On the other hand, the most expensive ones are still Lesser Town, New Town or Vinohrady.
There are a lot of people who do not agree with the short-term rental practices. They criticize the provision of services that turned into nothing but mere hotel rooms.
“Regardless, it is terribly silly that you pay taxes, and some virus suddenly helps you solve a problem, instead of the government,”
said Petr Městecký, the Chairman of the association Snesitelné bydlení (Tolerable Housing).
Mortgages for more than 150 billion
According to the Fincetrum Hypoindex, banks provided mortgages for more than 150.3 billion CZK in the first half of the year. Low interest rates contributed to the high demand. Another trend during the pandemic was cottage rentals. To disappear from the city and enjoy peace and quiet in the countryside… There were almost twice as many cottages sold this year than in 2019. Their prices have risen due to the high interest.