Martin Vahter of 1Partner Kinnisvara claimed that property prices in Tallinn will be driven by a general economic growth, a rise in salaries, and increasing urbanization.

"Real estate prices are growing along with the general cost of living and a 5-7 percent increase of apartments in Tallinn and another few hubs can be expected next year," Vahter noted in a company press release, according to BNS.

"The increasingly higher-earning middle class is dominating the market and buying substantial homes, which is why the market is breaking, so to speak, at prices €50,000 higher than before. Whereas so far, the number of buyers has clearly fallen away at apartments at the €200,000 or higher level, that ceiling now stands at €250,000. For houses, the 'pain' threshold has risen from €300,000 to €350,000," Vahter said.

Vahter added that developers giving large discounts on apartments at higher values is a thing of the past.

"If a developer has enough money, they have little incentive to sell an expensive apartment quickly and at a low price," Vahter said.

However, Vahter added, the price increase only concerns the larger population hubs.

"Dozens of terraced houses are being built in the neighboring rural municipalities of the capital city at such a pace that houses are being built on one end and people are already living in them on the other end," he said, adding that real estate may instead lose value in those regions of Estonia with a declining population.

Vahter also said that construction is inevitably becoming more and more expensive.

"Construction costs are influenced by both rising labor costs and ever-tightening, energy-saving requirements," he added.

"As the cost of construction per square meter rises, developers make smaller apartments to keep the final price accessible. New developments are tuned to be highly efficient, and no additional square meters are being produced. Essentially, real estate is being approached in the same way as travel: Airplane seats and row spacings are getting ever narrower," Vahter claimed.

By the same token, the newer two- or three-room apartments at the lower end of the market are around 10 square meters smaller than before.

"Fortunately, smaller apartments are often equipped with better ventilation, air does not 'run out' and one can still live in the home," Vahter said.

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