Where is the return on investment in housing for short-term rentals growing?

Lower prices for new buildings and increased interest in traveling around the country have increased the return on investment in the purchase of apartments for short-term rentals. The average payback period of investments has decreased from 12 to 11 years, and the fastest way to return funds is in Voronezh, Chelyabinsk, Volgograd and Rostov-on-Don. The potential of the short-term rental segment is preserved due to the prospect of increasing the tourist flow.

The return on investment period when buying an apartment in the primary market in million-plus cities for daily rent decreased from 12 to 11 years over the year, Avito Nedvizhimost calculated. Calculations are based on the fact that the accommodation will be occupied by guests 21 days per month – this is the average for the market, maintenance and depreciation costs are not taken into account. In Sutochno.ru, the payback period is estimated at 7–15 years, depending on the region. According to Avito Nedvizhimost, the growth in profitability was affected by a decrease in the average cost of a lot in the primary market by 1.6% per year, to 6.2 million rubles, and an increase over the same period in the average daily rental rate by 10%, to 2 .2 thousand rubles

In Tvil.ru, the average cost of a night in apartments across the country as a whole is estimated at 3.4 thousand rubles, which is 8.8% more than a year earlier. According to Sutochno.ru, prices increased by 13% over the year, to 4.2 thousand rubles. According to Ostrovok.ru, the most pronounced increase in the average price was observed in Sochi – by 35% per year, to 5.8 thousand rubles. The increase in the cost of short-term rentals is dictated by general economic factors and the interest of tourists in domestic destinations, says Yury Kuznetsov, CEO of Sutochno.ru. Alexey Popov, head of Cyan.Analytics, notes the “explosive” price increase in locations that have increased tourist flow in the last two seasons.

Oksana Shustikova, director of development and communications at Tvil.ru, adds that the popularity of tourist accommodation in housing has been growing since the COVID-19 pandemic. In the sales structure of the service, the share of such bookings increased from 27.8% to 36.5% over three years. According to OneTwoTrip.ru, most tourists rent apartments or apartments in St. Petersburg, Moscow, Sochi, Kaliningrad and Yekaterinburg. Interest is growing as supply increases. On Ostrovok.ru, the number of rented apartments and suites in Russia increased by 35% over the year, to 56,000 lots. Cyan.Analytics calls the organic growth of exposure from August 2022 by 26.3%, to 101,000 lots.

According to Avito Nedvizhimost, the fastest investment – in nine years – will pay off when buying an apartment for short-term rent in Voronezh, Chelyabinsk, Volgograd or Rostov-on-Don. By last June, the payback period here was reduced by 2.4-3.3 years. In Moscow, with an average housing cost of 14.1 million rubles. and a rate of 3 thousand rubles. per day, investments can pay off in 19 years. In St. Petersburg, analysts estimate the average repayment period at 13 years, with an average real estate value of 8.3 million rubles. and a rental rate of 2.5 thousand rubles. per day.

According to Yuri Kuznetsov, investments in the short-term lease segment can pay off 1.5–2 times faster than in the case of renting an apartment for a long-term lease. Avito Nedvizhimost estimates the payback period for housing for long-term rental in the Moscow market at 23 years, and in St. Petersburg at 29 years at average rates of 55 thousand rubles. and 25 thousand rubles. per month, respectively, and provided that the apartment is occupied 11 months a year.

Mr. Kuznetsov considers regional cities more suitable for buying an apartment for short-term rent, where the market is not yet overheated, and the flow of tourists is year-round. As an example, he cites Kaliningrad, Derbent and Kislovodsk. Alexey Popov believes that the short-term rental segment has growth potential. Only the removal of restrictions on the operation of airports in the south of the country and the gradual restoration of the incoming tourist flow can lead to an increase in the number of tourist trips by tens of percent, he points out. Artem Kromochkin, head of short-term lease at Avito Nedvizhimost, believes that short-term lease will become even more profitable in the future due to rising rates.

Alexandra Mertsalova