Rental residential market Q4 2023: challenging, as expected, but relief is on the horizon

In the last quarter of 2023, developments in the rental residential market differed between major cities. In light of the statistics, the biggest challenges in Q4 were in the Helsinki Metropolitan Area, where increased supply has increased tenants’ bargaining power.

“In the last quarter of 2023, the number of non-subsidised rental apartments available or becoming available in the cities of the metropolitan area was still more than half as many than before the pandemic. Rental announcements increased at the end of the year, especially in the Helsinki metropolitan area, where the occupancy rate fell below 91% in Q4. Occupancy rates in large cities outside the Helsinki metropolitan area remained significantly higher,” says Retta’s Real Estate Analyst Anton Takkavuori.

According to KTI Finland’s data, in Q4, occupancy rates increased to 97.5% in Oulu, 96.4% in Jyväskylä and 94.1% in Lahti. In Lahti, the occupancy rate was still 91.7% in the second quarter of 2023, so the development of occupancy rates in the region has been robust. Occupancy rates fell in Turku and Tampere but were significantly higher than the market average (92.3%). In Turku, the occupancy rate in Q4 was 94.7%, and in Tampere, 95.6%.

High occupancy rates also drove up rents outside the Helsinki Metropolitan Area

According to KTI, rents in cities outside the Helsinki Metropolitan Area with more than 100,000 residents rose by an average of 1.3 per cent in new leases signed in Q4 compared to the same quarter of the previous year. Similarly, due to high occupancy rates, rents increased more than the average in Q4 in Oulu (2.6%) and Jyväskylä (2.1%) compared to last year. Since 2020, the rental trend in new lease agreements has been more positive in large cities outside the Helsinki Metropolitan Area than within it.

The large volume of housing construction projects initiated in previous years will continue to generate significant new housing production until the first half of 2024. A record-breaking 47,000 apartments were started in 2021. Also, another 37,000 apartments were started in 2022. Housing starts began to dive in 2023 and are forecast to fall to less than half the 2021 peak in 2024.

Alongside the slowdown in supply growth, population growth in large cities is expected to gradually begin to improve occupancy rates and create upward pressure on rents. In 2023, urbanisation continued with great momentum: according to Statistics Finland’s preliminary data, population growth in Helsinki, Espoo, Tampere, Turku, Jyväskylä and Kuopio was higher than at any time since 1972, thanks to increased immigration and Ukrainian refugees.

“Driven by strong urbanisation and a collapse in new apartment starts, a turnaround is already in sight at a time when the factors sustaining the demand for rental housing haven’t disappeared,” concludes Takkavuori.

The figures are based on the stock of more than 100,000 non-subsidised rental apartments owned by professional residential real estate investors monitored by KTI and on data published by Statistics Finland.

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Anton Takkavuori
Real Estate Analyst
Retta Management
Puh. 0400 853 528