ARCO REAL ESTATE

• A characteristic feature of the rental market in the beginning of 2012 was a catastrophic shortage of high-quality rental apartments and it seems that the situation will not change soon, as most of the apartments that have been offered for rent before, now are rented out on a long term basis. Such a shortage can cause a more rapid rise in rents than expected

„An interesting observation made in 2011 is that requirements of tenants are affected by depreciation of apartments", - this is the comment of Līva Jaunozola, Head of the Rental Department of ARCO REAL ESTATE, regarding the situation in the real estate rental market.

Taking into account the fact that most of the apartments offered in the rental market were renovated and improved during the period from 2005 to 2007, the apartments have been exposed to 5 years long wear and tear, and just in 2001 the tenants have increasingly set as a precondition that a cosmetic repair should be carried out in the apartment before its occupation. Due to wear and tear of housing, tenants often prefer unfurnished or partly furnished apartments, or request apartment owners to change the furniture. Often the tenant is willing to pay a deposit of two month rent in advance, in order to make the landlord to perform cosmetic repair and replace the furniture.

Rental agreements, concluded in 2011, show that lease terms are increasing. If in 2010 the average lease term was ranging from 6 months to 1 year, in 2011 there were more and more long-term leases for 2-5 years. In this way, tenants will make themselves secure against market fluctuations, or they have long-term plans as to residence in Latvia. There was a new trend - at the conclusion of the contract to pay the rent for 6 months or even one year ahead, which shows that potential tenants have made certain savings, and in this way the tenants will make themselves secure against any unexpected change in their income. By no means unimportant is the fact that if the rent is paid for a year ahead, landlords are more obliging as to rent amount and discounts.

"Rental rights" that were very popular in the past, have been superseded by a new trend in the rental market – tenants are looking for not repaired apartments, where owners would be willing to enter into long-term lease for 5-10 years for a nominal rental fee of 1.4 EUR (1 LVL) / m² (plus public utilities charges), but the tenant, for his/her part, is ready to invest in the real estate of the owner (the average amount is from 8000 to 20,000 euro) and carry out major repairs. Also, apartments with "grey" interior decoration level in the so-called "new projects" are intensively demanded by the tenants who are looking for property that could be repaired and arranged according to their own taste. This tendency is only to be welcomed as it definitely improves the overall quality of real estates. "These properties have been looked for mostly by tenants who can not find originally decorated apartments in the existing supply and prefer renovation of property at their own discretion," concludes L.Jaunozola. Increasingly, on ad sites, there are now ads containing apartment owners' offers of non-renovated apartments for long-term rent. Also, the properties taken over by banks are often vandalized, with brutally dismantled kitchen and plumbing equipment, and the previous experience of ARCO REAL ESTATE in letting such property shows interest of tenants to invest their personal funds in estate improvement, thus getting in return favourable lease terms for several years.

Apartment owners, before entering into tenancy contracts, are increasingly seeking more information about tenants' jobs, income, persons who would live together with tenants in the apartment. „The owners are willing to wait in order to sign a contract with a desirable tenant, rather than rent out the apartment to the first person, who is willing to pay a deposit. A characteristic feature of the rental market in the beginning of 2012 was a catastrophic shortage of high-quality rental apartments and it seems that the situation will not change soon, as most of the apartments that have been offered for rent before, now are rented out on a long term basis. Such a shortage can cause a more rapid rise in rents than expected", informs L.Jaunozola.

Additional information:
Līva Jaunozola
GSM: + 371 2642 4119
liva.jaunozola@arcoreal.lv
www.arcoreal.lv

29.02.2012.