The pandemic continues to hit the rental market; according to HousingAnywhere's International Rent Index Report the first quarter of 2021 sees prices still falling, albeit less rapidly than in the previous period. Here's what's happening in European cities.
Rooms for rent: Milan sees the biggest fall in rents
In Italy, for private rooms, there continues to be a significant drop in rental prices compared to Q1 2020, so much so that three Italian cities are present in the top 5 European cities where rents for single rooms have undergone the greatest reduction in 2021: Milan is in first place, followed by Madrid, Turin, Rome and Valencia. Compared to the first quarter of 2020, Milan sees average prices for a single room drop in 2021 to €561 (-13.7%), Turin to €386 (-13.3%), Rome to €525 (-13.2%) and Florence to €431 (-6.4%).
This is not the case with flat prices, whose numbers show very slight percentage decreases compared to last year. In 2021, flat prices in Milan have in fact decreased by only 3.8% (€1,145) compared to the first quarter of 2020, in Rome the reduction is -5.9% (€1,060), in Florence -5.4% (€936). Turin, on the other hand, continues the downward trend for single rooms, offering prices for flats 11.5% lower than in the same quarter of 2020.
Rents in Milan and Rome, signs of recovery
If we look instead at the numbers indicative of the situation in Q1 2021 compared to the previous quarter (Q4 2020) we can see that the market is slowly recovering and that prices are beginning to stabilise on pre-Covid market values. If compared to Q1 2020 Milan and Rome show a significant decrease in prices for single rooms, it is not the same for rents compared to Q4 2020 where the decrease is respectively only -1.6% and -2.1%. Moreover, while Turin shows a maintenance of prices compared to the previous quarter (0.0%), Florence reveals an increase of 0.3%. The situation is similar for rents of two-room flats.
Rooms for rent increasingly expensive in Berlin
While Italy and Spain continue to show the most significant falls in rents across Europe, other European cities have seen a halt to the trend of falling rental prices. For example, after falling throughout 2020 due to the cap on rents, flat prices in Berlin are showing a strong increase: +11% to €1,122 per month. Since the introduction of the much disputed Mietendeckel in February 2020, rents have fallen between 10 and 15%. The German Economic Institute (DIW) reported that while the rent cap has driven a sharp drop in costs across the capital, it has caused the market to contract by more than 50% for Berlin.
For the first time since Q2 2020, Madrid saw rents rise by 1.4% (€1,119) for one-bedroom apartments. As a result of tourist accommodation no longer being booked, many of those flats in the higher price segments have re-entered the residential market, which is also under a proposed rent cap.
Vienna is halting the strong downward trend seen in previous quarters. Legislation against short-term rentals, combined with reduced international demand, is still affecting rental prices, but at a slower pace than in previous months. One-bedroom apartments fell by 8.5% compared to -10.5% last quarter, with an average rent of €876 per month.
Rental market: 2021 forecast
"With the rental market seemingly tied to the release of vaccines, a glimmer of light is opening up for the market. Of course, it's always best to be cautious and prudent, but the future looks much better than the last 12 months," said Djordy Seelmann, CEO of HousingAnywhere. "The vaccination campaign is proceeding more slowly than the world had hoped, and this is also reflected in the slowdown in the recovery of rental markets. Indeed, we expect supply to start growing again once the closures are lifted. Airbnb flats that were made available to the residential rental market during the pandemic will return to the tourism sector unless governments take decisive action to protect the residential housing stock."
In fact, some cities are already limiting the number of tourist flats to be converted into residential flats. As it is, the shortage of housing for long-term rental compared to demand is still rampant in most major cities. Hardly any new housing has been built or completed, and universities have reported an increase in enrolment, with a higher than usual peak expected next September.
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