The Number of Rental Properties Decreases and Prices Are Already Rising

According to Risto Vähi, an analyst at Estonia's largest real estate agency Uus Maa, rental prices have started rising in major attraction centers, which is particularly evident in the case of cheaper apartments.

According to Vähi, rental prices hit bottom in winter and spring, but demand has since grown and prices are slowly rising. "From the perspective of rental property owners, there is strong demand for both short-term and long-term apartments. On one hand, many people are taking a wait-and-see approach to buying and therefore prefer to rent, and on the other hand, strong tourism season also supports demand," added Vähi.

"Currently, there is very high rental interest in Tallinn on the so-called golden mile between Rotermann and Noblessner near the sea, and in Kalamaja. If the building is nice, people are happy to rent both short-term and long-term also in the suburbs – for example in Nõmme. It is clear that former hot areas like the Old Town and the Kentmanni Street area have lost popularity," said Vähi.

"Due to demand, the number of rental offerings in Tallinn has fallen by five percent in recent months. While prices for more expensive properties have largely remained at the same level, cheaper properties have risen. For example, in residential areas, the price increase compared to winter is even up to 15%," said Vähi.

According to Uus Maa's analyst, cheaper and more liquid real estate is an indicator of longer-term real estate trends. "Usually changes happen first in residential areas and the rest of the market follows. I am quite convinced that rental prices will not become cheaper anymore, but rather will rise as demand grows, especially when students start looking for apartments again toward autumn," added Vähi.

"Currently, there is a rare situation over the years – the monthly rent is cheaper than buying, that is, the monthly mortgage payment, but soon this will inevitably balance out. Mortgage interest rates could start falling next year and in the long run, buying will still be cheaper," added Vähi.