7 new directions in the Estonian rental market, an investor should know

7 new directions in the Estonian rental market, an investor should know

Maia Lõško, Sales Manager, Scandium Kinnisvara

The year 2021 has started with a rapid pace in the real estate market. Despite the health crisis, apartment sales are setting records. According to Scandium Kinnisvara’s sales statistics, interest is also high among investors in rental apartments. Although real estate may seem like a stoic asset class, where changes take place over a long period of time, the rental real estate sector has developed strongly in recent years. Here are seven new directions to keep in mind when buying a rental apartment.

  1. The era of rental houses is beginning

In the last few years, several buildings have been built in Tallinn, where apartments are offered exclusively for rent. In some cases, the entire house is rented by one company; in other cases, the range of owners of the rental apartments is wide. The advantage of rental houses is the overlapping interests of the owners of rental apartments – the tenants are welcome in the house, and the renting of apartments is accepted. This eliminates the risk that the housing association or neighbors will not favor or even hinder renting out.

It can also be an advantage to have a well-known landlord or rental brand in the house. Other landlords also benefit from the good image and marketing of the house.

  • Preferereces are a building that offers added value

Based on examples from abroad, Estonia has also started to develop buildings where, in addition to apartments, different common areas are used by the residents. For example, in the Avangard house located at Narva mnt 40 in Tallinn, you will find a gym for residents, a laundry room, and a sun terrace; The DUO Lofts in Tartu also have a private cinema hall and function space. In the rental market, such additional premises provide a significant advantage and justify charging a higher rental price.

  • Young people like lofts

The loft is considered to be a two-story apartment, which has arisen due to the reconstruction of an old industrial building into an apartment building. The introduction of industrial buildings as apartment buildings is a global trend that has become one of the most popular in Estonia as well. 

Many young people like lofts due to their uniqueness, but also due to their practical use of space – a relatively small area creates more function by bringing the sleeping area to the ceiling. Thanks to the high ceilings and large windows, the apartments are spacious, bright, and trendy.

  • Smart locks offer convenience

Smart locks allow access to the house and apartment without a key, i.e., with a code. The codes can be changed remotely. This is a good solution for short-term rentals when guests change frequently. A unique code can be sent to the new guest, which will be activated on the specified date – there is no need to go on-site and arrange a meeting with the guests. However, the advantage of smart locks is manifested when the corresponding locks are also on the exterior doors and on general doors of the house.  

  • The rental apartment does not have to be located in Tallinn

During the corona crisis, the rental market in the capital came under severe pressure. Foreign tourism decreased drastically, which led to a saturation of the rental market – earlier Airbnb apartments also entered the long-term rental market. In other Estonian cities, the increase in domestic tourism helped to reduce the pressure on the rental market. In addition, rental prices in Tartu and Pärnu, for example, have risen significantly, which makes it possible to achieve a similar or even better return than in the capital.

  • Professional interior designers and managers make life easier

A number of full-service providers have entered the market, taking over the management of the entire rental apartment – from furnishing and finding a tenant to dealing with minor worries. When real estate is handled on the side of the main job or remotely, many small investors have also gone the way of choosing a manager. There are advantages here for both landlords and tenants – the quality of service increases and encourages competitors to do the same.

  • Legislation

An amendment to the law governing the rental market and relations is coming into force this year. According to experts, many acceptable changes favor the interests of landlords and make disputes with tenants easier. However, the rule here is that the simplest remedy is caution and prevention. A thorough background check on the prospective tenant and a reasonable lease contract will help to prevent any inconveniences and disputes that may arise, no matter how simple they may become.