Micro-apartments Outpace Investors

The heyday of micro-apartments that appeared on the real estate market a few years ago is over, and new developments are no longer adding them in the previous volumes. The reason is investors' preference to place money in foreign real estate instead.

According to real estate experts, the boom in micro-apartments, or living spaces of up to 20 square meters, falls in the years 2018 - 2022, when investing in real estate for rental purposes was very popular. Although micro-apartments have not disappeared from the market, notes Sven Abrams, a member of the board of real estate company City Property, they are no longer being added much to new developments because the demand comparable to the boom years no longer exists. "This is apparently related to the general condition of the real estate market, where after the start of the war in Ukraine, many investors have decided to purchase real estate abroad instead of in Estonia to mitigate their risks," says Abrams. According to him, another reason behind the decline in investor interest could be the fact that real estate prices in Estonia have not risen for several years and rental prices have declined somewhat. What has also changed, according to Abrams, is that whereas foreign buyers used to purchase micro-apartments, now the buyers are more likely to be local.

According to Urmas Uibomäe, CEO of the real estate portal Kinnisvara24, their portal currently has about 120 micro-apartments for sale and about 140 for rent. Most of the offers are concentrated in the three major cities, but such homes can also be found, for example, in Viljandi.

"In terms of sales offers, the price per square meter is over 3000 euros. While in Tallinn and Tartu it stays around 3700 and 3300 euros respectively, for example in Pärnu the price per square meter of a micro-apartment even exceeds 4000 euros," says Uibomäe. If you want to rent a micro-apartment of up to 20 square meters for yourself, you should expect a monthly rent of approximately 280 euros in Tallinn and Tartu, but 230 euros in Pärnu.

The steep price per square meter does not mean, however, that there is no interest in micro-apartments. According to Edit Naela, a member of the board of City Property, there is always demand for such living spaces and their rental yield continues to be better than for larger apartments.

"It is important to set the right price for the apartment, then finding an owner is not difficult. One could say that against the backdrop of general cost of living increases, micro-apartments remain quite popular. Also, their rental prices have fallen less than those of larger apartments, and since people are looking for more affordable living space against the backdrop of rising prices, a micro-apartment is a very good opportunity for cost savings and finding a tenant is therefore not very difficult," she explains.