Apartment building reconstruction stalls due to uncertainty, rising costs

Apartment block in Mustamäe.
Apartment block in Mustamäe. Source: Ken Mürk/ERR

Rising living costs and debt burden fears are causing apartment associations to hold back on renovation projects and taking out new loans.

Approximately 14,000 apartment blocks need reconstruction work, data from the Ministry of Economic Affairs and Communications shows.

But many housing associations are worried about taking out new loans to fund renovations in the current economic climate, Dagmar Mattiisen, a member of the board of the Estonian Union of Cooperative Housing (Eesti Korteriühistute Liit), told Wednesday's "Aktuaalne kaamera".

"Extremely unsure. First of all, there are already difficulties in getting a larger loan. Older people are scared about rising prices. They are quite worried. And what concerns middle-aged people is that they have already have some kind of loan obligation and taking out a big reconstruction loan right now, it makes people concerned," Mattiisen said.

If two years ago, apartment blocks with 30 apartments were reconstructed with €800,000, then now it would cost €1.2 million. Several have decided that without support from Kredex they will only take out small loans to cover emergency repair work.

Head of Swedbank's Apartment Association Janis Pugri said the profile of applicants has changed.

"In previous years, when Kredex gave funding, there were larger sums for complete renovation. Now, unfortunately, when there is no support at the moment, then there are the same amount of applicants but smaller sums will be requested for one-off jobs," Purgi said.

Construction companies say there is still demand for renovations but they are also having to postpone work due to market fluctuations.

Lauri Raud, a member of the Tolira Construction Board, said many people are hesitating when they receive a quote for renovation work due to rising costs.

"Another problem concerns small houses. They certainly have a higher cost of renovation per unit and per apartment. At this point, the state would need to rethink the support system and increase the support rate for smaller apartments, regardless of the region," he said.

A larger round of applications for reconstruction will be opened at the end of the year by the ministry. Ivo Jaanisoo, head of the construction and housing department, said there will be a focus on smaller apartment buildings.


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Editor: Helen Wright

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