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Real estate firms: Small rental price drop not evidence of a general trend

Apartment blocks in Tallinn.
Apartment blocks in Tallinn.

While in July, apartment rental prices fell by close to 4 percent on year, some real estate companies in Estonia say this is a fairly run-of-the-mill statistical fluctuation, and not a trend expected to continue.

State agency Statistics Estonia says rents fell by 3.7 percent in July this year, which seems exceptional among the general inflationary tendency. Those involved in the real estate market, however, are tending not to stress this price fall, while a companies' own statistics may not reveal it whatsoever.

Martin Vaher, CEO of 1Partner Kinnisvara, told ERR that according to company data, rents have not fallen, adding that: "I can also confirm this personally, as we also manage the rental real estate portfolio of our clients' apartments, and there has been no noticeable drop in prices."

Sales partner at Pindi Kinnisvara Peep Sooman noted that the 3.7 percent drop reported by the Statistics Office is not fundamental, because there are many factors that affect prices, and sometimes one factor affects the statistics more, sometimes another.

Sooman said: "Things may depend a little on the structure of those properties up for rent, and also on the location and how much is offered, plus the data that [the statistics] are being based on. I would neither over- nor under-emphasize this 3.7 percent in any way."

A 5-10 percent fluctuation in rentals in the space of a year is normal and to be expected, Martin Vaher said.

Sooman noted that compared with the situation on the rental market at the end of 2022, things have calmed down – while the highs of that period are not being seen, neither is a trend for a deepening in the current rate of fall.

The late 2022 spike, Vahter said, when rents increases were around 5 percent, compared with as high as 20 percent that spring, was mostly the result of the influx of war refugees fleeing Russia's invasion of Ukraine.

Sooman noted that the supply of apartments for rent is currently quite good, one of the factors in holding back a price increase even as inflation elsewhere is still ongoing.

Rents are around the level they were on the eve of the Covid pandemic, he added.

"If we take Tallinn alone, there are essentially the same number of rental apartments on offer as there were before the coronavirus pandemic, that is, 1,300 or so. Between then and now, there had been some strong ups and downs, and Ukrainian refugees wiped out the market," Sooman said.

As for Estonia's second city, Sooman said that rental apartment supply is up about 15 percent on the pre-pandemic period, but this is in part due to the time of year; through the month of August this figure will contract as students look for a place to stay ahead of the next academic year.

Where and how Statistics Estonia gathers its data on rentals is also significant in that apartment rentals are one of the components of the Consumer Price Index (CPI).

Vahter said he had no idea how this was done, adding that his firm does not supply Statistics Estonia with data to that end.

Sooman, on the other hand, said that so far as he was aware, some real estate companies certainly provide the office with data, adding that since the Estonian rental market is not very large, a multiplicity of factors tend to influence the monthly average prices – including fluctuating rental rates themselves.

A spokesperson for Statistics Estonia told ERR that the data in question is harvested from real estate portals, with reference to one- and two-room apartment rentals in Tallinn and Tartu.

In these cases, there is a real estate market to speak of, and rental prices are comparable, the spokesperson, Märt Umbleja, added.

On the other hand, monthly CPI figures do not include house rental prices, as these are not comparable on a month-to-month basis, he said.

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Editor: Andrew Whyte

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