Apartment prices in Tallinn are rising too fast for residents of the capital to keep up. However, lower interest rates on housing loans is providing a bit of breathing space.
During the first half of 2021, interest in real estate spiked pushing prices to new highs. While activity has calmed down over the course of the year, there are now fewer apartments for sale but more interested buyers, ETV's current affairs show "Aktuaalne kaamera" reported on Thursday.
"There is a lot of idle money, not only for individuals, but also for companies. This has caused the median price to grow by 8.8 percent in Estonia, 15 percent for new real estate in the city center and more than 20 percent in Haabersti," said Tõnu Palm, chief economist at Luminor.
There is currently a shortage of new developments and, coupled with the rising cost of construction materials, this is pushing prices up.
1Partner CEO Martin Vahter: "While one developer after another announced the suspension of construction projects last year, this year everyone started to open these projects up and a deficit arose, but by now all supply channels are opening up, adjustment is taking place."
In the second half of 2021, apartment prices will exceed the growth of net wages and people's purchasing power. Only the most affluent by property as an investment to rent. Palm said: "Estonia is no different from the rest of the world... [R]eal estate will definitely move away from the average salary."
Vahter said: "If there are usually 700-800 apartment transactions per month in Tallinn, then in the first half of the year for a few months it even reached a thousand apartments. But today these numbers have dropped back to 700. It can be said that the real estate market has calmed down,"
Vahter noted that while in 2013-2015 there were double-digit growth figures, now it has returned to single-digit.
The €1 billion recently released from the second pillar pension fund has not affected the price for next developments.
"The average payout will still be €8,000, but given that new real estate, two-room for example, will cost €230,000 in the city center, this money will go to the purchase of secondary market apartments," said Palm.
Editor: Helen Wright