Landlords in major European cities are attempting to convert short-term rental accommodations into longer term leases as COVID-19 hobbles tourism and the globetrotting habits of young professionals. First quarter 2020 results from the online rental listings platform, HousingAnywhere, reveal a recent brake on what had been steadily climbing rents since January 2019. However, that’s only a glimpse of the fallout projected to come.
“Italy, the first hard-hit European country by COVID-19 showed a relatively stable Q1 in terms of rental prices, as the majority of rental properties were already booked for Q1,” the accompanying commentary from HousingAnywhere notes. “The country, which has a large percentage of international renters, is likely to see the effects of the crisis in Q2 reflected in its rental prices.”
The survey analyzes more than 100,300 units in 17 cities posted as short-, mid- or long-term availabilities in the 15 months from January 2019 to March 2020. Although average Q1 2020 rents for one-bedroom units were higher than Q4 2019 in 16 of 17 markets, it was generally a modest increment when compared with year-over-year jumps. Barcelona was alone in recording a slip, but the 0.1 decline for the quarter is largely masked in 1.6 per cent gain since March 2019.
London remained the priciest of the 17 markets as of March 2020, with an average one-bedroom rent of €1,756 (CAD $2,669), followed by Amsterdam at €1,685 (CAD $2,561) and Munich at €1,530 (CAD $2,325). For London, a 0.5 per cent increase in average rents since Q4 2019 was the most lacklustre growth since 2015. Upward trajectories in Amsterdam (0.1 per cent) and Munich (0.4 per cent) were even less pronounced.
Vienna enjoyed the largest surge, with average rent for one-bedroom apartments jumping 4.6 per cent to €1,016 (CAD $1,544). Yet, that’s well off the double-digit pace of the 11.5 per cent year-over-year increase since Q1 2019.
In addition to COVID-19, first quarter sluggishness in some markets is attributed to politics — notably the Catalonian separation movement creating uneasiness in Barcelona; and the February imposition of a five-year rent freeze in Berlin. Average rents for one bedroom apartments in the latter city crept up by 0.1 per cent since Q4 2019 in contrast to the 4.3 per cent year-over-year increase since March 2019.
Listings across the HousingAnywhere platform are now shifting away from short-term — defined as one-night to one-month — with a corresponding 170 per cent jump in mid-term listings for one-month to one-year. Djordy Seelmann, chief executive officer of HousingAnywhere, reports more landlords are looking to local markets to find tenants and advertising mid- and longer term availabilities as a hedge against slumping international travel.
“Landlords are freezing their rental prices and, in some cases, even lowering them,” he observes. “The question remains how long this trend will last once the COVID-19 crisis is over and international travel and mobility starts returning.”
That’s not anticipated until at least the third quarter of 2020. In the interim, some landlords are bracing for possible government intervention in the rental housing marketplace.
“If the 2008 economic crisis can serve as an indication, homeownership will decrease and the demand for rentals will increase in the coming years,” Seelmann says. “It’s important to keep in mind during these uncertain times that in the past, government initiatives focused on applying stricter control of the domestic real estate market. For instance, rent caps have been proven to be successful short-term solutions to housing affordability.”