According to Land Board data, real estate prices in Estonia's smaller cities and towns have in some places quadrupled over the past ten years. This price growth is being driven primarily by small towns in Central and Southern Estonia, where prices have surged 20 percent on year and demand for real estate continues to exceed supply.
After eight years of living and working in Finland, web developer Marek Paas decided last year to return to Estonia. He opted for the southeastern city of Võru, but finding a place to live there proved quite the challenge.
"Around the time I started looking, the availability [of real estate] was absolutely miniscule," Paas said. "There was basically just one ideal apartment that fit with what I was looking for."
He was lucky, as the real estate market in Southeastern Estonia specifically is short on everything right now — country homes used for summer vacations, residential plots in town, garages, but especially apartments.
"The biggest issue is a lack of renovated new apartments on both the sales and the rental markets," said Ranno Kalda, a real estate agent at Lumen Kinnisvarabüroo. "They just aren't available, and when they do get listed for rent or sale, then they're essentially gone within a matter of days. Demand on the market currently exceeds supply several times over."
Anne Pärgma, head of housing loans at Swedbank, confirmed the same, adding that the number of housing loan applications for Võru and Põlva counties has increased as well. The size of housing loans paid out for homes in Southeastern Estonia has increased by more than 30 percent on year as well.
A good example of the current situation on the market is an apartment in central Võru, which last year would have been listed at a cost of €600 per square meter but is currently going for €850 per square meter.
The average cost per square meter of new apartments in Võru, however, has soared to €1,500.
"Compared to last year, prices have gone up some 20 percent, for both rental apartments and those up for sale," Kalda said.
The real estate agent noted that just a couple of years ago, there were absolutely no new developments whatsoever in Võru. While a couple of completely renovated apartment buildings in town have since been completed, there is still demand for more.
"Why the lukewarm interest in this region on developers' part? That's because banks look at Southern Estonia as some kind of provincial corner of the country," said Ain Tarrend, developer of the recently overhauled Tamula House in Võru. "Loans aren't given to developers, and loans aren't given to potential clients who would be buyers.
Editor: Aili Vahtla