Rents for housing keep rising moderately – tenants still have the upper hand on the market
Rents for housing have been expected to fall as a result of the pandemic. In fact, even if individual lessors have had to adjust their rent requests in some areas, rents in general continue to rise moderately. However, the coronavirus has changed the tenants’ preferences – they are now looking for homes that are further away from city centres and have room for remote working.
There has never been as much rental housing available on the market as now. Prices are still rising, but more moderately. Overall, the market is currently price-sensitive. Price pressure is particularly strong in areas where a great deal of new housing has been built recently.
Rents most affected by new construction
The situation on the housing rental market varies both by region and area. In general, rents continue to rise moderately in areas with a positive migration balance, such as Helsinki metropolitan area, Tampere and Turku. Rental prices are most affected by new construction.
In recent years, supply has increased considerably. New rental apartments have been built at a record pace. More Arava and interest-subsidised housing, i.e., ARA housing, has been built, as well as non-subsidised housing. Investor interest in the rental housing market has grown significantly.
This interest has been reflected in the growing numbers of professional real estate investors operating in the rental market. Foreign money from Europe and the United States has also been flowing into the Finnish rental housing market.
The same trend is also seen among private investors. Up to 70–80% of small apartments in new properties are bought to let. Finnish households are a very important buy-to-let investor group in the rental market as a whole.
Prices vary between areas
The impact of the increase in supply on rental prices is strongest in areas where new properties have been built in large numbers and construction is continuing. In such areas, rents may even be falling. This is the case in Jyväskylä and Lahti, for example.
In the Helsinki metropolitan area, the impact of new construction on rental prices is greatest in areas with large construction projects of entire neighbourhoods. There isn’t enough demand for rental housing in such areas in relation to the rapidly increased number of rental apartments. Indications of this have been observed in recent years in, for example, Suurpelto and Vermonniitty in Espoo, and Kivistö in Vantaa. In other words, prices differ between areas.
The downward pressure on rental prices has hit private investors particularly hard. If they own one or two apartments, any missed rents will play a larger role in their finances than in the finances of large property owners. In some areas, private investors have been more sensitive to lower rents in order to maintain a stable cash flow from their rental apartments.
Growth in remote working changes housing needs
The coronavirus has also changed the rental market. Initially there were fears that the pandemic would momentarily freeze the housing market altogether, but this did not happen. In fact, the opposite happened - there was even a small increase in renting and changing homes, and the real estate business is currently booming.
In recent years, it has become increasingly important for tenants that homes are pleasant and attractive as more rental housing of equal quality to owner-occupied housing has been built. The emergence of remote working has made it easier to rent out apartments that have room for a remote workstation.
In addition, there is a trend where apartments no longer need to be located in the centres of large cities. The commute can now be twenty minutes longer than before, if people continue to go to work only a couple of times a week instead of the previous five times.
In practice, this means that rental homes can now be located within an hour’s distance from the city centre. In the Helsinki metropolitan area, homes along the railway line north of Helsinki have begun to attract more interest than before.
Distance learning has slightly reduced the demand for rental housing in student cities, but the persistence of the trend cannot yet be predicted.
Location, floor plan and attractiveness still matter
Not everything has changed in the housing rental market though. Well-designed rental apartments that are in good condition are still desirable. Good connections are still important. Extremely popular areas with a limited supply of rental housing also remain highly sought after.
Helsinki city centre is holding its ground. New properties are usually built on the outskirts of cities. Comfortable apartments in a good location, with a good floor plan and an agreeable price remain extremely popular.