Changing Preferences Mislead People in Tallinn's Rental Market Price Increases

Tallinn's rental prices have surged due to increased demand and changing tenant preferences. Renting living space has increasingly become a conscious choice, and the capital is seeing growing demand for flexible, high-quality living spaces with added value, while apartment size becomes less decisive in making choices.

Janek Busch, founder of one of Estonia's largest accommodation companies Larsen, explained that the Tallinn rental market has experienced a significant price jump, with the overall increase in rental prices driven primarily by changing consumer preferences. Demand is also boosted by young people, students, and foreigners, for whom renting is increasingly becoming a conscious choice and an alternative to buying a home.

"Renting living space has become a normal and conscious choice because people want more flexibility. Buying an apartment is no longer necessarily a goal or a measure of success, especially for young people and those moving to Estonia from abroad. This trend is also amplified by the general rise in real estate prices, as buying a home in the capital is expensive," explained Busch.

Due to foreign workers and students, demand for temporary rental spaces has also surged sharply in Tallinn's rental market. Living spaces are sought for periods ranging from a few days, weeks, to several months or a couple of years.

According to Busch, rental price increases were also contributed to by the most intense period of the accommodation market—the second half of summer. "Currently, we see demand growth especially among digital nomads and foreigners working in technology companies. In the second half of summer, students also joined Tallinn's rental market, looking for smaller but safe and high-quality living spaces for the upcoming academic year starting in autumn," commented Busch.

A new trend has emerged where smaller apartments, but professionally managed, are competing increasingly successfully in the rental market with larger apartments. Compact living space makes it easier to move and reduce consumption. "Housing choices are increasingly influenced by changing preferences of renters. The number of square meters is no longer the main argument, and many people consciously choose a smaller apartment. At the same time, it is increasingly valued that the living space is new, clean, quiet, and well-maintained," said Busch.

In the case of professional landlords, tenants also appreciate quick access to help with any apartment-related problems, whether it's a forgotten key or a water leak. When choosing a rental home, tenants also consider building maintenance and additional services offered by a professional landlord. Important criteria are the safety of the living space and controlled quality, as well as predictability of costs associated with the living space. At Larsen, shared spaces for different purposes are also valued, including fitness rooms and roof terraces in buildings.

According to Busch, some people moving to the capital prefer to wait for the peak season to pass, initially moving to a temporary and flexible rental space, then finding a long-term home after the high season ends. It is also common to spend a few weeks or months in a rental before making a long-term choice, to better understand one's needs, learn about the city's logistics, and assess additional costs. "This behavioral pattern also requires flexibility from landlords in designing contract terms, rental periods, and occupancy forecasting. Larsen has built a clear competitive advantage from flexibility," added Busch.