Expert: Students and Postponed Purchase Decisions Drive Up Rental Prices
According to Risto Vähi, analyst at Estonia's largest real estate office Uus Maa, rental prices are expected to rise in major cities by autumn, driven by both the start of the academic year and delayed purchasing decisions.
According to Vähi, the largest seasonal increase is expected in Tartu, where only one-third of students who expressed interest received a place in student housing. "Rental prices in Tartu dormitories have increased by 5% compared to the previous year, which is less than the market average. Tartu free market apartment rental prices have risen by nearly 10% in recent months and the ceiling has likely not been reached yet," said Vähi.
"In many countries there are large campuses specifically for student housing, but in Tartu there is clearly a shortage of dormitory places every year. To alleviate the problem, the university could consider concluding long-term framework agreements with private owners and entrepreneurs to offer students, on one hand, affordable and predictable conditions and, on the other hand, guaranteed returns for owners," said Vähi.
"The university is currently trying to manage on its own in Tartu, but if investors were offered a 5-10-year guaranteed contract, then entrepreneurs could well become interested in building rental housing for students," said Vähi.
According to Uus Maa's analyst, the student housing shortage problem will deepen over time, as fewer people live with relatives. "People's expectations for privacy and also their financial possibilities have simply changed," added Vähi.
"A student is a reliable and rather undemanding tenant. If there have been concerns about maintenance in the past, society has changed and major problems rarely occur. The landlord is also supported by changed and functioning legislation, apartments are insured and risks are managed," said Vähi.
"In addition to Tartu, continued rental price increases are expected in Tallinn and Pärnu, as people postpone purchasing decisions. In Pärnu and other resorts, prices that peaked in summer will typically fall in autumn along with demand, but compared to the same time last year, an increase of about 5% is still expected. In Tallinn as well, price growth continues and rental prices will return to last year's levels. If last year at this time the tone was still set by the price rally related to Ukrainian refugees, which was followed by a decline, then this year the rental market has recovered quickly," added Vähi.
