Real Estate Expert: Number of Vacant Rental Apartments Decreasing, but Prices Won't Rise Much This Year
According to Igor Habal, a member of the management board of Estonia's largest real estate office Uus Maa, the number of apartment rental offerings has indeed decreased, but there is no reason to fear significant price increases in the coming year.
According to Habal, small investors who have invested in rental apartments over recent years have realized that owning 1-2 apartments does not bring financial freedom, but rather is still work. "Rental business is not passive income, but rather monthly management. In the big picture, the most profitable part of investing in a rental apartment is the growth of asset value over time. In a situation where selling prices are rising from the bottom again and rental rates cannot keep up, returns will remain low this year as well, and investor interest in acquiring assets will cool off," said Habal.
"The Estonian rental market is becoming increasingly professional, similar to Western countries. Small investors won't disappear, but their share is decreasing. At the same time, the influence of real estate funds is growing, as they build rental houses, own hundreds of apartments, and use professional management teams. This makes the service more expensive, but enriches the market. The activities of real estate funds bring more 3- and 4-room apartments to the market, for example, which were previously scarce," added Habal.
"In the long term, the share of renters in Estonia will grow. If currently about 80% of Estonians are property owners, then in the future we will approach Western Europe, where the share of owners and renters is roughly equal. People's mindset is also changing, and instead of owning, home is increasingly taken as a monthly service. In terms of monthly costs, renting will remain twenty percent cheaper than owning for the coming years," said Habal.
"Currently, the number of offerings on the rental market has declined slightly - owners prefer to keep their current tenants, on the other hand, the number of tourists and foreigners has not returned to pre-coronavirus levels, which is why activity is lower and we cannot speak of undersupply," said the member of Uus Maa's management board.
"Despite the decrease in supply, no significant increase in rental prices is expected this year. According to forecasts, the rise in rental prices this year will remain in the same order of magnitude as general inflation," added Habal.
