Indefinite Lease, Greenery and Economy or What Generation Z is Looking for in the Real Estate Market

Recently, there has been talk about young people's growing salary expectations, but what are Generation Z's expectations for the real estate market? Kinnisvara24 portal CEO Urmas Uibomäe and Uus Maa Five Stars realtor Ly Johanson analyzed the consumer preferences and behavior of people under 27 years old in the real estate market.

While previous generations were helped by bank loans when purchasing their first home, according to Uus Maa Five Stars realtor Ly Johanson, today's young people do not want to take on excessive payment obligations. "Global trends show that Generation Z prefers renting over owning, both when it comes to cars and real estate. Young people want flexibility, they don't want to take on large loan obligations or be tied to one place for the rest of their lives."

Johanson added that rental homes are more appealing to young people because they offer great freedom – at any time they can easily change their place of residence, whether it's another city or country. "Instead of owning things and permanently tying themselves to their home country, Generation Z emphasizes exploring the world and enjoying a good quality of life. Therefore, young people increasingly prefer the option of an indefinite rental agreement."

Kinnisvara24's analysis also confirms that young people belonging to Generation Z are primarily interested in rental apartments. "Most young people don't rent an apartment alone, but together with a partner or friends. This way they can afford a rental home in a better location and condition," said the portal's CEO Urmas Uibomäe.

When choosing a rental apartment, neighborhoods with restaurants, parks, and sports clubs are preferred. An apartment is preferred to be rented in a new development or a renovated, well-planned smaller building. Kinnisvara24's search statistics show that the presence of a balcony or terrace is an important search criterion, and for many young people it's also important that pets are allowed in the rental apartment.

However, there are also young people within Generation Z who want to own a home. "When buying real estate, location is the key factor, where there would be opportunities for leisure activities, sports, shopping, and entertainment in the immediate surroundings. The concept of a 15-minute city is used as a reference. Everything needed for life must be near the home and ideally so that you don't need to own a car at all," pointed out Ly Johanson.

Desirable neighborhoods for living are the city center and its immediate surroundings in larger cities. In Tallinn, people want to live in neighborhoods close to the heart of the city so they can move around without a car. Preferred neighborhoods include, for example, Kalamaja, Noblessner, Pelgulinn, and Kristiine. "Since the younger generation's financial literacy is at a good level, they are willing to buy a home near universities so that in the future they can rent out the apartment," said Urmas Uibomäe.

Young people's journey in the real estate market usually begins with more affordable prices in newer buildings, but they generally cannot yet afford new developments. "A Generation Z young person does not want to buy an apartment in a panel building built in the 1960s-1980s," both Johanson and Uibomäe are convinced. According to Uibomäe, there is a fear that the building renovation costs will be too high and the purchase won't be worthwhile. Additionally, they are concerned about complicated bureaucracy. "A dilapidated exterior facade reduces the value of the property and the apartment may be difficult to sell. Building renovation work requires an active homeowners' association, consent from all owners, and proper investment. Although renovation assistance can be applied for, managing the project can be complicated, and a Generation Z young person is not interested in that," said Uibomäe.

According to Ly Johanson, in addition to the age of the building, the neighborhood also plays an important role in home selection. "Young people prefer neighborhoods that have fully developed infrastructure, activity, and also enough parks to spend leisure time. Generation Z is particularly environmentally conscious, preferring a location close to nature and an energy-efficient home."

It's quite difficult to find homes that meet such criteria in the city center neighborhoods and within a budget suitable for young people. "A couple of dozen minutes away from the city, for example in the Saue or Laagri area, there are more options, but those who move there are more likely to be new parents, and young people living as couples usually don't," said Johanson. Uibomäe added that some young people are willing to renovate an apartment themselves in order to get a more affordable home closer to the city center.

Young people like homes that have modern and economical solutions. "Generation Z, which has grown up in a digital environment, values technological solutions and user-friendliness. The smart home concept is valued," Ly Johanson is convinced. The apartment doesn't need to be large, but due to flexible work models, it's preferred that it can also accommodate a comfortable home office.