Buyer shortage has seen developers rent out new apartments in bulk, which has created oversupply on the rental market. This is causing rent prices for newer and more expensive apartments to come down.
While the flats on the top floors of ITM Grupp's Harkuranna Torn development have largely been sold, the lower stories of the 14-floor building remain vacant. Real estate agent Nikita Mostepanov said that sales are not going well.
"It is slow going today with the Euribor rate where it is. People are rather waiting to see what the future will bring. I don't think we'll see improvement this year. Perhaps next spring. There is little in the way of sales right now," he shared.
This is why the developer has instead decided to furnish and rent out some of the apartments at the Harkuranna Torn.
"We thought we'd try to go with several rental apartments. Perhaps people who cannot afford to buy now can rent until they save up the money," the broker said.
But such practices have driven up the number of available rental spaces in Tallinn.
"We might see 10-20, even 60 apartments come up for rent in some areas, which correlates to how many flats have not been sold in a given area," said Risto Vähi, analyst for real estate agents Uus Maa.
This has in turn affected rent prices in the capital.
Vähi said that a lot of new rental space hitting the market will inevitably bring prices down and give those looking for a place to live the upper hand in negotiations. "The price is coming down everywhere," he said.
The number of rent classifieds suggest a 20-percent increase in Tallinn.
"We had 2,000 for rent ads a year ago, while it is now closer to 2,500. Growth has been fastest in the Tallinn City Center and Põhja-Tallinn at around 15 percent. Looking at Tartu, we see virtually no change in the number of classifieds or the price," said Karin Noppel-Kokkerov, head of the City24 real estate classifieds portal.
She suggested that prices are coming down in the more expensive end of the market.
"Prices tend to be headed down. While the average price is up 1 percent in Lasnamäe, there is clear oversupply and lower prices are in store in the more expensive end of the market in Tallinn."
Editor: Barbara Oja, Marcus Turovski