Housing rental market sees rare changes during pandemic: Aktia

The housing rental market in Finland has gone through exceptional changes during the pandemic, according to Lasse Corin, Aktia's Chief Economist.

The increase in the rents of one-room flats in apartment blocks in the Helsinki Metropolitan Area has calmed down significantly. At the same time the difference in rents between one-room flats and apartment block flats with three rooms or more has diminished, said Corin in a review published by Aktia on Monday, according to an official press release.

Corin stated that in previous years, the increase in rental housing mainly occurred in households of one person. in 2020, the first year of COVID, the number of households including three persons or more and that are living in rental housing has clearly increased.

“The demand for larger rental flats has increased and there are several reasons for this,” said Corin.

“Remote work is most likely the biggest reason for this. Households that are already renting may find that they need additional space. It is also possible that households that are still uncertain about the need for additional space. Instead of buying a larger home immediately, people want to test the need of additional square metres in the form of a rental flat, prior to making the actual purchase decision,” he added.

Housing prices have increased sharply, especially in growth areas, which may well increase the popularity of rental housing. In 2020, the prices of old three-room flats in apartment blocks increased on average by 2.7 per cent and the prices of one-room flats by 2.2 per cent. It is not uncommon that the prices for larger flats in growth centres increase more than 5 per cent per year.

The prices of apartment block flats with three rooms and above increased by 3.3 percentage points faster than the prices of one-room flats in the third quarter of last year. The difference was the greatest since 2000.

“At the same time, the difference in how rents are increasing for one-room flats and larger flats has disappeared. Before COVID, the situation was different, as the rents for one-room flats rose much faster than for larger apartments.” Corin said.

Over the past few years, the focus of property investors has clearly been on smaller housing, such as one-room flats. However, the pandemic has changed the development of the rental market. Many factors suggest the market for larger rental flats in growth areas picking up long-term.