Residential rental market Q1 2024: Rental market remains on the defensive

In the first quarter of 2024, the number of rental advertisements increased by 20% year-on-year in the whole country, based on data from the Oikotie online service. This was also reflected in the increased vacancies in rental housing. In Q1 2024, the Helsinki Metropolitan Area’s vacancy rate increased to 10.4%. According to KTI Finland, vacancy rates also increased in all major cities outside the Helsinki Metropolitan Area in the first quarter of the year but remained clearly lower than in the metropolitan area, at about 5.4% overall.

“While the challenges in the residential rental market are not yet over, the fundamentals remain strong and support the long-term outlook. Household incomes and the population of major cities are rising, which is normalising the housing supply and creating a more positive outlook. This spring’s Rakli Residential Rental Barometer had lower figures for the expected trends in rental housing supply than ever before in the statistical history of the survey, starting from 2009,” says Anton Takkavuori, Retta’s real estate analyst.

Gap year in a story of growth

The pace of rent increases is projected to accelerate towards the end of the year in Pellervo Economic Research PTT’s market forecast. The abundant supply of rental housing has continued to curb rental prices in the early part of the year. This year will be another year in which lessors will still not be able to raise rents to fully match the increase in costs. According to PTT, non-subsidised rents are expected to increase by an average of 2% this year.

The moderate growth in rents is explained by the supply of rental apartments that has been higher than usual for a relatively long period. Furthermore, a significant number of previously started residential construction projects have been completed in the early part of the year, which is also reflected in the occupancy rates of rental housing, especially in the Helsinki Metropolitan Area. In Q1 2024, occupancy rates were 90.5% in Helsinki, 89.7% in Espoo and 89.3% in Vantaa in KTI’s statistics. In the Helsinki Metropolitan Area, the vacancy rates for family housing were lower than for smaller units. For example, in Q1 2024, the vacancy rate of three-bedroom apartments in the Helsinki Metropolitan Area was 9.9%, while for studio apartments, it was 12%.

“In the metropolitan area, rents in existing and new leases have developed in opposite directions, reflecting the current market situation. In some places, it has been necessary to lower the rent to find tenants. Given the statistics, it would be a good idea to try to hold on to good tenants,” Takkavuori comments on the market situation. 

Lengthy wait for a turnaround

In Q1, the vacancy rate of rental housing exceeded the 7% limit in Turku and Lahti and remained below 4% in Oulu. Vacancy rates have clearly remained more moderate in large cities outside the Helsinki Metropolitan Area, which is also reflected in the development of rents. Rents have clearly fared better in large cities outside the metropolitan area.

Outside the Helsinki region, lessors have managed to pass their increased costs on to rents. Statistics also show that in major cities, rents have risen more for family housing than for smaller units. Oulu stands out as an exception in Statistics Finland’s data, where rents for non-subsidised studio flats (3.6%) rose more than for three-bedroom and larger rental housing (2.7%) in Q1 compared to last year.

According to Statistics Finland, in the Helsinki Metropolitan Area, non-subsidised rents for one- and two-bedroom apartments rose by 0.2% and 0.1% respectively in Q1 2024 compared to the previous year, while rents for three-bedroom and larger rental units increased by 0.9%. The city of Tampere, as another example, saw smaller annual changes in the rents for non-subsidised studio flats (2.1%) than for three-bedroom and larger apartments (2.8%).

Fog gradually clearing on transaction market

Real estate transaction volumes continued to be modest in the first quarter of 2024. However, on a positive note, the total transaction volume in Q1 was up 13% compared to the same period last year. According to KTI’s Transaction Information Service, the total volume of transactions in the first quarter of 2024 came to around EUR 460 million. Investor confidence and investment activity are expected to gradually improve towards the end of the year as inflation eases and interest rates become more moderate. The market expects trading in rental property portfolios to pick up as the pricing environment becomes clearer, but growth is

Additional information:

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Anton Takkavuori
Retta Management
Puh. 0400 853 528

* Figures based on KTI, Statistics Finland, and MDI’s data and material