Estonian construction volumes exceeded pre-crisis levels in the previous quarter with the production value of construction enterprises in Estonia and abroad increasing 15 percent year-on-year. Developers say that as long as demand keeps up, apartments and other buildings will continue to be constructed.
The construction market is on very solid ground. People have savings to buy newer and larger apartments, banks are eager to hand out loans and developers have space to build. It does not seem like things will collapse anytime soon, ETV's daily affairs show "Aktuaalne kaamera" reported on Thursday.
"Well, the client decides. As long as there is demand, Merko and other companies will continue to satisfy that demand. While construction prices have increased 20 and 30 percent, even 50 and 100 percent for certain products, sales prices have gone up some 20 percent. Time will tell what the future will bring and what the market is capable of receiving," Merko Ehitus Eesti board chair Ivo Volkov said.
High demand is reflected in the extraordinarily active housing loan market. The Bank of Estonia announced on Thursday that an all-time record €184 million was issued in housing loans in October with the average loan exceeding €100,000 for the first time in history.
"We have beaten our records this year. These are very exciting times on the market this year, both real estate and loan markets. This is more an effect of the coronavirus crisis, where practically all needs changed suddenly. Many have worked from home during the coronavirus crisis, this led to a need to improve living conditions," LHV private finance department head Kätlin Vatsel said.
More construction and more housing loans being issued does not necessarily mean there is a real estate bubble developing, set to burst at any time. On the contrary, real estate development company Hepsor does not see enough developments.
"There could even be more apartments on the market. This would help slow inflation, which developers would not oppose in the long term. We like a stable and calm market with reasonable inflation. Sudden price hikes and drops could affect the market negatively," said Hepsor board member Henri Laks.
Kätlin Vatsel said purchasing power is key. "If we compare purchasing power with the previous crisis, it is more than double, meaning that a client earning the average wage can buy more square meters," the LHV department head noted.
The 15 percent increase in construction volume largely stems from a lower reference base. There was a huge drop last year, but growth compared to pre-crisis periods has been stable, Ivo Volkov said.
Editor: Kristjan Kallaste