Real estate companies predict recovery from crisis, followed by stability

Panel house in Lasnamäe.
Panel house in Lasnamäe. Source: Anna Aurelia Minev/ERR

The real estate sector is recovering from the coronavirus wave in spring. According to the Association of Real Estate Companies (Kinnisvarafirmade Liit), this is more a reflection of last year's construction activity and the crisis is not fully over, however.

According to real estate portal, the number of deals in September increase by 32 percent compared with August. Prices also increased; the price per square meter is 10 percent higher than this time last year. At the same time, manager at another portal, City24, Karin Noppel-Kokerov, said that in August, there were 20 percent fewer deals in comparison with last year. Noppel-Kokerov agreed however that signs of recovery are clear.

"It seems that the warm summer and extended vacations have pushed back decisions, but now they are being made," Noppel-Kokerov said. She added that the number of apartments sold in September was essentially the same as last year.

Board member at Pindi Real Estate firm Peep Soomann concurred that the market is recovering and the low point has been passed. However, he said wouldn't venture to predict what will happen in future, since economic and industry issues have not disappeared, meaning the recovery is not the final word.

"We are a little afraid of ascenario that at one point, the market can freeze a bit," Sooman said.

"The main question is: What the extent of the damage is, how many people have been left without a job, what are their reserves, and how many people will have trouble with loans. In other words, there are several possible scenarios, and I wouldn't want to predict the future. Everything I say probably won't happen."

Chief-executive of the Association of Real Estate Companies (Eesti Kinnisvarafirmade Liit) Tõnis Rüütli reports that the current recovery comes from last year's new developments, and even if the prices stay the same, that will be all, or there may even be a fall.

"The real estate sector sees a delay compared with the rest of the economy and this is around a year and a half. By the statistics, we can see purchases of new developments when they have reached contract stage under property law, and were already fixed from last year when the law of obligations contract was concluded," Rüütel said.

A law of obligations contract consists of a pre-agreement where terms are set and the parties agree to responsibilities. The property law asüect is concluded when a property is handed over to its new owners.

"If we draw a broader image, the economic crisis has been noticeable, so it will all start to affect things. However, I am predicting stability for the coming years, with a small decrease," Rüütel said.

Rüütel said he would have expected stability even without the crisis, since the market rise had continued for 10 years.


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Editor: Roberta Vaino, Andrew Whyte

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