Rental apartments market in Prague – this is the subject of many newspaper articles nowadays. We are experiencing a situation that would have been hard to imagine before. There is a surplus of rental flats and rental prices have fallen dramatically. In today’s blog, I specify the current level of rent in Prague and what to do to find a tenant as soon as possible.
At the beginning, I´ll just mention the cause of the current surplus. It´s a limited possibility to travel. In the first phase, it affected tourist accommodation (AirBnB, etc.). Although there were some revenues during the summer, occupancy wasn´t the same as in the past and rates per night fell by half. Currently, revenues are zero and zero will they be for many months to come. Most of these flats are in the centre and then in Prague 2 and 3. The landlords have decided to offer flats to long-term tenants, who, however, don´t want to move to these flats because they are afraid (often rightly) that the landlord will evict them when people start to travel again. In the second phase, all travel-dependent businesses were affected. The employees of these businesses don´t have a job which means that they don´t rent anything in Prague as they prefer to stay at home in the countryside. These are mainly employees of restaurants, hotels, cafes, in cultural sector, travel agencies, cleaning services, taxis, etc. Here landlords offering long-term rentals are affected too, they had to start looking for new tenants, so the problem began to spill over from the centre to other parts of Prague. In the third phase, the number of students, the water of life of rental market in September each year, dropped too. Year-on-year, 40 percent fewer foreign students are reported; due to distance learning, the decrease in the number of apartments rented to students will be even higher. And the last phase is the introduction of home office. Many companies recommended home office to their employees and some companies even ordered working from home. Since everything is in operation the same way as when going to work, it´s probably a permanent change of work. These employees no longer have to pay rent in Prague. But now enough of pessimism, the situation isn´t hopeless.
In spite of it all, it is possible to rent out an apartment very well. However, it is necessary to accept a few facts and meet good fortune halfway.
First you need to have more patience and plan more. If in the past we were used to finding a tenant in 14 days, today I´d count with a realistic term of 1-2 months. So, if we know that the tenant will leave, for example, on December 1, 2020, we´ll start looking for a new one as early as in October so that there is no gap in being paid the rent and you don´t lose money unnecessarily.
Furthermore, it is also necessary to set the rent at the current level. If we had rents set at the level of 2019, then we´ll have to reduce prices. We can find out the new level of rent analytically via the data you´ll find in the www.cemap.cz application (all historical offers of rents are gathered here, including a more detailed description, to determine the current rent I´d examine the data for the last 3 months and reduce the resulting rent by 5 percent) or you can use my estimate below.
In Prague, the level of rent doesn´t differ significantly by location. It can be said that in exclusive locations, such as Vinohrady, Letná, Dejvice, etc., the rent is higher by only 10, maximally 20 percent than in the wider centre of Prague, and in housing estates the rent is max. 10 percent lower than in the wider centre of Prague, so I can afford a simplified estimate of rents which I present below and which is common in the locations of the wider centre of Prague:
It should also be mentioned that there are rental flats, the market rent of which far exceeds the usual above-mentioned prices and that at these higher prices they will find their tenant even today. It must be absolutely first-class quality property and must have the following parameters: great location, building after reconstruction, high floor, luxury state, beautiful views, accessories such as garage, reception, garden, etc.
We should find out whether we have set the rent correctly very soon after we start to offer (you can find more about how to rent apartments in the Manual of a successful landlord ebook). If we don´t have at least 3 people interested in a tour a week, then the advertised rent is still too high and I recommend reducing it as quickly as possible as every month when you have no tenant you lose 8.3 percent of annual rent + you have to pay the expenses related to the apartment which makes the resulting loss even higher. You don´t have to be unhappy that you are renting for little, the situation will improve sooner or later and rents will rise again sometime, your task today is to rent out, ideally to a solid tenant (for more on how to choose a tenant, see the 5 rules for choosing a reliable tenant ebook).
In conclusion, I´d like to focus on the real estate agency’s commission. If you hire a real estate agency to find a tenant and you make an agreement with it that you´d pay it one month’s rent for finding a tenant, make sure that the real estate agency won´t demand a fee of one month’s rent from the tenant either, in which case it´ll be an obstacle to renting out your apartment quickly. Today, tenants have a lot to choose from and they´ll find another comparable apartment where they won´t have to pay the commission.
I wish you a lot of success!