Expert: Home Rental Has Not Been This Affordable in 15 Years

According to Mihkel Eliste, a professional appraiser and analysis expert at Estonia's largest real estate agency Uus Maa, rental prices are currently at their lowest level in 15 years compared to income.

"The current ratio of gross income to rental price is comparable to mid-2010. However, if we compare today's economic and social situation to 2010, which was still a time of deep economic recession, the current situation is still very good for renters. Against the backdrop of other inflation, people may not feel it, but considering today's gross salaries, rental prices are currently 21% more favorable than the long-term average, suggesting a possible future increase of up to 27% to reach the long-term average level," commented Eliste.

According to Uus Maa's 7th, or highest level appraiser, renting is relatively affordable because significant investment has been made in Tallinn's rental real estate over recent years and the rental supply is high. "The number of vacant rental apartments increased quite consistently until the beginning of 2024. At the same time, Tallinn's population has not grown significantly since 2023, and high inflation and years of economic struggles have made people cautious. Although the economic situation is slowly improving, the aftereffects of this trend are still being felt," said Eliste.

"If the historical average rental yield in Tallinn is around 5.6%, it was only 4.6% last year. Among apartments, owners face the lowest rental yields at the expensive end, for properties worth 350,000 euros and more. The situation is even more difficult in the townhouse and house market, where particularly low rental yields are often seen precisely in brand new residential properties, which from an investor's perspective encourages preference for older housing stock for rental purposes," added Eliste.

"The rental market will inevitably face changes ahead. The supply of rental apartments began to decline slightly from the second quarter of 2024 – compared to the beginning of 2024, there are now approximately 7% fewer vacant rental apartments across Estonia. The current low level of new rental investments suggests a situation where rental supply will gradually become scarcer. Rental prices already began to rise slightly last year, and the average rental price in Tallinn this year is approximately 3.5% higher compared to January last year," said Eliste.

"If we look at 2011, when the economy started to grow again, rental prices increased by as much as 17% in one year. We are once again at the beginning of an economic growth cycle, and I would not be very surprised if the rental price increase in 2026 or 2027 reaches close to 10% in some regions of Estonia," added Eliste.

"Anyone who has the opportunity should consider fixing the rental price at its current level for a longer period in some form. General inflation will unfortunately not disappear anywhere in today's environment, rather it will simply move from the grocery store back to the real estate and financial markets in the meantime," noted Eliste.