Construction of real estate in Tallinn fell by almost a half in the first quarter of 2020, largely, though not wholly, due to the coronavirus pandemic and its economic effects. Apartment sales may fall by a similar figure, though experts say that it is too early to forecast with any degree of precision, adding that in many cases where people already have loans lined up on properties they want to buy, the pandemic needn't stop this going ahead. Nonetheless the pandemic's effects which have already hit other sectors, such as hotels and catering, very hard, are likely to continue to make their presence known in the real estate market.
Analyst with realtor Arco Vara Mihkel Eliste says that construction activity in Tallinn and environs has fallen by almost half in the first quarter on year, with changes in the real estate market not directly related to the coronavirus pandemic also having a negative impact on the construction sector in January and February.
In other words, according to Eliste, construction activity would have fallen this year even without the emergency situation.
Igor Habal, analyst at the real estate agency Uus Maa, says it is difficult to forecast the number of apartments to be sold in the coming months.
"According to the statistics from the last two years, on average more than 700 apartments have been sold per quarter, so in a more optimistic scenario this number could remain at 400-500 per month over the next three months, in the more pessimistic scenario, the number of new apartments sold would be less than 200," he said.
Interest in new builds continues, and turnover has not completely disappeared, but a larger decline is forecast.
"Due to the decline in activity, sales have also fallen, and we will probably see a 50 percent or bigger decline in sales in the coming months," Habal went on.
House prices may fall
Mihkel Eliste concurred that the sale of new apartments is getting tough, with the coming months likely to bring down sale prices for many projects.
Elari Tamme, CEO of Arco Vara, said while the number of transactions has decreased, this does not mean that the real estate market is completely closed for business in the way the hotel sector is.
"Real estate agencies have found ways to move forward," he said, citing virtual tours and banks' online lending solutions.
Tamme added that market activity has understandably fallen considerably, but the decline in interest mainly affects those who are currently unable to buy real estate or are still uncertain.
Over the next three months, the number of new real estate bookings has dropped by about half, he said.
"Money hasn't disappeared anywhere; where there is a will to buy and the chances of getting a bank loan. It's just a matter of timing."
Developers putting a brake on new projects
Mihkel Eliste noted that people starting to to cancel verbal agreements for the purchase of real estate - a broad-based withdrawal from contracts under the law of obligations in which case the buyer would lose 10-20 percent of the down payment money – has not been visible yet.
Peep Sooman, board member at Pindi Kinnisvara, said new real estate is being added to the market, but developers are putting a brake on previously planned projects.
Alternatively, new projects might be added at the expense of those that have already been started earlier.
Projects where four or five houses have already been built may also get a sixth. At the same time, according to Sooman, planned projects, which have already been abandoned can also be counted on the fingers of two hands.
"It is clear that the construction of the houses will be stopped lightly either, due to this being a major disaster. Houses will still get built to completion."
Sooman added that making forecasts is pointless at the moment, because it is difficult to predict the market situation and consumer behavior. However, consumer confidence is currently very low, he added.
"In economic terms, we are only on the eve of the ," said Sooman.
"Very large sectors have been hit so hard that this mood is now being transferred to the real estate sector."
"Something that the previous crisis taught us is that Estonia is not a sacred space that remains untouched by the problems of other countries, and the real estate sector is not untouched by the problems of other sectors," Sooman said.
Editor: Andrew Whyte