Landlords weighing the options of renting or selling their apartments in urban areas

The supply of houses for rent today is three times higher than the demand recorded, according to a recent survey by Kapa Research presented during the 7th Prodexpo exhibition. More than one in five respondents to the survey (21.8 percent) said they have a property for rent during this period, while the percentage of those seeking such a property is no higher than 6.7 percent. This by itself can explain the pressures on the rental market, resulting in the decline of lease rates by as much as 10 percent, particularly in the so-called expensive areas, from 2004 onward. Nevertheless, the prevailing sense at this stage is that the rentals market is rebounding and within the next six to 12 months lease rates are expected to rise. If forecasts prove right, areas such as Halandri and Holargos will offer opportunities for renting out some nice houses at particularly good rates. «In the above areas, as well as in Aghia Paraskevi, there is a multitude of houses rented for 600-650 euros per month; I expect that in the next 12 months these rates will rise by 200 euros,» predicts Lefteris Potamianos, of the Search and Find real estate agency. He adds that »people are returning to the solution of renting due to the very high cost of buying a newly built or used house. Many people also worry about the course of interest rates, so they are waiting for the dust to settle first. In this context they choose to turn to renting for two or three years instead of getting involved in a 250,000-300,000-euro adventure in the housing market.» Yet for the time being this sense of a rebound in rates is not translating into an increase in demand for houses for rent. Data from the RE/MAX chain of estate agencies show that in most areas of Athens and Thessaloniki rental rates remain steady without significant fluctuations. In central areas of the capital rents range from 5 to 8 euros per square meter, in the northern and northeastern suburbs between 5 and 9 euros/sq.m. and in most desirable areas of the southern suburbs from 7 to 10 euros/sq.m. These rates are only an estimate, as the rental rate of an apartment is directly affected by the location, age and state of the property. Also, according to the unwritten law of the real estate market, smaller flats always fetch a better rate per square meter than bigger ones. «Small houses such as efficiencies or one-bedroom flats are undoubtedly the leaders in the renting market. Their small surface (around 60-65 sq.m.) allows for an increased rate compared with bigger flats, maintaining the final cost at a level that is affordable by the majority of the population with different social characteristics,» explains Potamianos. «Therefore the city center, which enjoys a great supply of small apartments, shows significant shifts between rental rates and sale prices, and remained unharmed by the recent crisis with flats in expensive areas suffering pressure,» he says. Given the low returns of renting and the increasing demand, the question for landlords is simple: Sell or rent? «When one has a property to sell or rent, the key is the yield, as with all types of investment. If the returns of renting are satisfactory, ranging between 4 and 5 percent, then the option of renting is advisable,» says Akis Kyratzis, a property counselor. However, renting as an investment option does not seem particularly attractive nowadays, because compared with 2000 the rent yield has declined from 5 percent to about 3.5 percent, that is a drop of about 30 percent. In this sense the revenues from the sale of the property and the investment of that money in another product could secure better returns for the owner. This is not the case with small apartments, though. These houses are more easily rented than sold, since lodgers consider them a non-permanent option, while in the long term the revenues from renting are definitely higher than those from a sale.