More and more rental properties are developing in Estonia | Economy

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The real estate company Lumi Capital has invested nearly 200 million euros in various rental properties in Tallinn. The company opened an apartment district on Manufaktuuri tänav, where it built 127 rental apartments. It also has buildings under development on Aiandi and Päevalille streets, totaling 264 apartments. The company’s portfolio consists of some 2,000 apartments across the Baltic States, of which 500 are still under development.

Lumi Capital’s commercial director, Reeli Simson, said the 127 apartments in the Manufaktuuri district are occupied and the interest of tenants is high.

“If you look at what the real estate prices have done recently, there are certainly people who do not think it is rational to acquire a living space. Living in a rental property offers the same security in terms of housing as owning a house or buying one using a bank loan, ”said Simson.

Real estate fund entrepreneur Eften will see its first tenants in its building in Kadaka puiestee in February. CEO Viljar Arakas said two more projects in Tallinn were in the negotiation phase. He said the company’s rental apartment building portfolio could include some 1,000 apartments in the Baltic States, with most Estonian apartments located in the capital.

“The rapid increase in construction prices will make this achievement much more difficult. It is clear that rental prices have not climbed as quickly as construction prices. As we know, the rental business tends to be a lower margin business than the rental of commercial space. are many environmental challenges we face, ”noted Arakas.

He added that the payback period for a rental property is between 17 and 18 years, depending on rental prices. However, there is a lot of potential in the sector.

“The rental sector is one of the most important topics for local governments in developed European capitals. Let’s look at the new German coalition, which has taken the decision to build 400,000 new apartments every year. The housing deficit and the resulting inflation and inaccessibility for the younger generation is an acute problem. It doesn’t seem to be the case for us now, but I’m quite sure that in a few years or election cycles it will become one of the most important topics, which Tallinn and other Estonian centers will discuss ahead of government elections. local, ”Arakas said.

Tõnu Toompark, trainer at the Kinnisvarakool training center, agreed with the entrepreneur. He said that while the availability of housing in Estonia is still good, but purchasing power is declining, leading people to turn to the rental market.

“If we go back to a micro Estonian level, then the arrival of professionally managed rental properties is very positive. You can’t manage a tall building any other way, you have to provide proper service and that could be an indicator for other tenants as well. to see what kind of service you have to offer. The direction to better quality is set somewhere, ”Toompark said.

In addition to Lumi Capital and Eften, real estate developers Scandium, Larsen and Koduingel also own rental apartment buildings. The real estate trainer said the most important factor in favor of rental apartments is low risk – the market is large enough and a tenant will eventually be found. As the risks are low, it also affects the investment.

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