Small apartments as an object for investment in Russia and abroad
Review prepared by Tranio and CIAN
Small apartments are traditionally in demand. At the same time, they are increasingly being acquired not as housing for themselves, but are considered as an object for investment. How much the investment will meet the investor’s expectations will largely depend on the country in which he plans to choose an apartment.
The best strategy for the investor will be the purchase of two small apartments, instead of one more spacious.
The advantages of this choice are as follows:
Greater confidence in income generation. The probability that both apartments will be left without tenants at the same time is not so high. And this means that the owner will somehow benefit. One large free apartment at the same time means a complete loss of income.
Demand from tenants. Both in Russia and in many European cities, most potential tenants are looking for smaller apartments, which seriously affects the time of “forced downtime” of real estate.
Liquidity. Small apartments are sold faster if the investor needs to quickly withdraw funds
Opportunity to maneuver. Instead of losing a large asset at a time, an investor can sell only one apartment, leaving the second.
Small-sized in Europe – current trends
The most important engines of growth in the attractiveness of housing with a small area are increased mobility in the labor market and tourist activity.
In European countries, a new trend is gaining popularity – micro-apartments – apartments with an area of 17–35 m². Such housing is most often furnished with furniture, includes a bathroom with shower, small kitchen and bedroom. The lack of space is compensated by the fact that usually in a building (apart-hotel) there is a room with storage booths, public recreation areas and laundry facilities. Investors acquire micro-apartments for renting to students, business travelers and seasonal workers, young professionals, tenants without a family or tourists. The market for micro-apartments is most developed in the UK and Germany. These two countries account for 86% of all deals made. Behind them are France and the Netherlands.
The average profitability of micro-apartments in the UK and Germany is 4–6% per annum. This is more than the yield from the long-term rental of a standard apartment (about 2-3% per annum in both countries).
In 2017, Tranio successfully implemented a residential complex in Berlin. The cost of apartments started from 119,000 euros, and their profitability was about 4.7%. Nowadays, there are more and more such offers. Thus, in the first quarter of 2019, a residential complex with 334 apartments in the center of Berlin (Big Mitte region) was commissioned. The cost of apartments from € 124,000, yield about 4% per annum.
Partners Tranio, London Relocation Consultancy, emphasize that in recent years, student apartments have become increasingly popular in the UK. At a very reasonable price, like, for example, this apartment in the center of Liverpool, they promise a record yield for both the UK and Western Europe – 8-8.5%! It should be borne in mind that the demand for housing for students in England is unlikely to decrease, even despite such serious political decisions as Brexit.
According to Tranio, small-scale products are quite popular in the Czech Republic, especially in Prague. Most often, they are acquired by parents for their children-students, lonely and elderly people, less often – by investors for renting. According to Czech legislation, the size of an apartment cannot be less than 16 m².
In the third quarter of 2017, the percentage of sales of apartments 1+ kk (a separate room with a kitchenette) was 16.7 (of all apartments sold in Prague). By the same period of 2018, this figure was already 24.4%. We can say that the format of 1 + kk apartments is the most in demand today in Prague. The profitability of real estate in the Czech Republic is about 5−7%. According to tranio.ru, housing prices in Prague range from 3,500 – 7,500 € / m²
For example, a furnished apartment of 24 m² (1 bedroom, 1 bathroom, kitchenette), located in the center of Prague, not far from the National Museum and Wenceslas Square, will cost 180,000 €. The apartment in the new building (commissioning in 1 quarter of 2019) in a park area, with a total area of 36 m² (1 bedroom, 1 bathroom, high quality finishes, panoramic window) will cost € 161,000. The price includes an underground parking space and a storage room. Two-storey apartment in a historic building of the XIX century (38 m², 2 bedrooms and 1 bathroom) is for sale at a price of € 141,000.
Apartment in Prague 38 m²
Apartment in Prague 38 m² https://tranio.ru/czech-republic/adt/1770961/
Property in seaside countries
According to statistics from Tranio customers, in cities located on the coast of Spain, for example, in the Costa Blanca region, neither studios, nor one-room small-sized ones are not particularly popular. Customers prefer to choose apartments with a larger area (from 50-60 m²)