The Rental Market Situation – How to Cope with Changed Circumstances

Coronavirus has not only disrupted the cards of the short-term accommodation business, but also those of the long-term rental market. Owners of accommodation apartments have had to reorient themselves towards long-term rental business or shut their doors and put their apartments up for sale.

Life has become bitter for all participants in the rental market. Many tenants have lost their jobs, had their salaries reduced, or found themselves in difficult situations for other reasons. Brokers, on the other hand, have to work considerably harder than before to find each new tenant.

We asked Alain Aun, co-founder of the rental contract platform Rendin, what is happening in the rental market and what he recommends doing to survive this crisis.

What are the biggest changes that have occurred in the rental market over the past few months?

The biggest change is that the landlord market has become a tenant market. There are far more apartments on the market and the selection is larger, which has lowered prices and they are likely to fall further in the future.

The second change is decreased income and pessimism about the future. This means that people are restricting their spending and making more thoughtful decisions. This is also entirely justified, because despite the reopened economy, we are still only entering a real economic crisis. Currently, entrepreneurs have been hit, which is a relatively small segment of the population. In many sectors, salary cuts are still ahead.

What does this mean for the rental market?

For the rental market, it means two very clear things.

First, the owners' risk increases and not by 20-30%, but many times over. If a rental space becomes vacant, it is more difficult to find a new tenant, and even if one exists, they may have payment difficulties.

We will probably soon hear about all sorts of disputes, defaulting tenants and other troubles that were a relatively small problem at the peak of the economy. The standard deposit of one month's rent becomes an increasingly less secure tool in resolving problems.

Second, the smaller financial capabilities of tenants mean for the rental market that they already find it difficult to just bear the initial costs: one month's rent, a broker's fee and a deposit add up to quite a considerable sum.

How many price negotiations do you see now, which were previously a rather rare phenomenon in rental relationships?

It still happens. The standard request is to lower the rent for three months and usually they agree to it as well.

But we also see that some owners are offering a better price themselves, because they feel that this way they can do something to ease the crisis and the situation of people.

Such accommodation – and one could even say responsibility – is very important in the current situation. Price reductions must be reasonable, because the owner also has no good alternatives. It is not very likely that if you cannot agree on a price and the tenant moves out, the owner will get the same price from a new tenant.

Communication, discussion and exploring possibilities are all fine, but it is bad when one party becomes very greedy. We have also seen this, by the way, from both sides. There are tenants who take advantage of the situation and ask for a cheaper rent, despite the fact that their income has remained the same. And on the other hand, there are owners who are not willing to lower the price in any way, referring to the 12-month contract.

Right now, we need to look for reasonable solutions. How to make it so that solving the problem is as painless as possible for both parties? Actually, no reasonable person tries to squeeze the last out of someone else when they see they are in trouble.

Tell us a few words about what Rendin is and who it is intended for?

Rendin is a rental contract platform intended for all people who participate in the rental market.

The old deposit system has had its day, using modern technological solutions it is possible to do things in a much more sensible way.

The parties to the contract are still the owner and the tenant, but we have taken the risk upon ourselves and insured it forward with an insurance company.

In simpler terms, this means that when a tenant concludes a contract through us, they do not have to pay a deposit, while the owner's property is protected at least 100 times better. We provide a three-month guarantee for payments and this applies to both rent and utility payments.

Rendin is also beneficial for brokers, because first, the process of concluding a contract through us is much easier and takes little time. Second, we do a background check on the tenant for the broker, for which we use appropriate public databases. You have the answer in seconds.

With the help of Rendin, the broker protects the owner, giving them significantly stronger protection compared to a deposit. This is also the duty of the broker as a rental market professional – to stand up for the owner's interests.

Third, brokers using Rendin have a clear competitive advantage over brokers taking deposits – it is easier to find tenant candidates.

By the way, we responded to the wishes of owners and now in the Rendin environment, in addition to the tenant, the owner can also be chosen as our fee payer. This gives an even greater advantage in finding a tenant.

What would you recommend to owners of accommodation apartments?

On a large scale, if the owner wants to continue with the accommodation business, they need to enter the long-term rental market. If tourism should recover to such an extent within a year and a half that maintaining an accommodation apartment pays for itself, that would be a miracle in a cube. I don't believe that.

Of course, there are exceptions where accommodation space may also pay for itself this summer. This is the case if it is located in a place where there are many domestic tourists and less competition, for example on Hiiumaa.

What would you recommend to a tenant who wants to take advantage of fallen prices to improve their living conditions and move to a larger apartment?

From an economic perspective, I would give a general recommendation to consume, because without it the economy will not recover, but from an individual's perspective, I would recommend being reasonable with your spending.

It is believed that this is the biggest crisis since the Second World War. In such a situation, it makes no sense to start exchanging smaller things for larger ones and modest ones for fancier ones. Rather, one should look for ways to get through some time more safely and economically.

Worse conditions are psychologically uncomfortable, but even more uncomfortable is when a job suddenly disappears and one can no longer pay for housing.

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