The median price in October was €2,035 per sq m, five percent higher than in September, though this does not reflect what is actually happening on the market and is in fact the result of property rights agreements made with new apartments, Arco Vara says.

"As of the beginning of November, the average price of sales offers* on the Tallinn apartment market was almost five percent lower," the real estate company noted. 

"The price drop already started to emerge in October in various parts of the country, especially in the outlying residential districts of Tallinn," the company added.

In October, a total of 1,771 apartments were sold in Estonia, a fall of 8.9 percent on the previous month and as much as 33 percent lower than October 2021.

"This decline in market activity was relatively expected, as already as early as September it could be observed that liquidity in the housing market in general has deteriorated sharply and sales timeframes have started to lengthen clearly against the backdrop of the growing volume of offers," said Arco Vara. 

"The fall in the number of transactions of a similar extent will probably continue for a prolonged period, and there is no reason to expect a rise in the number of purchase and sale transactions, or an increase in price levels in the coming quarters, regardless of the continuation or otherwise of the current widespread inflation."

In terms of the larger cities, it is already clear that the price rises had ended by the beginning of this autumn at the latest, while asking prices had started to be adjusted downwards, with regard to higher-priced properties. Sellers' unrealistic expectations have started to subside, while it is no longer so easy to reach a deal, meaning the use of the services of real estate agents can once again be considered a growing trend, Arco Vara said.

Arco Vara noted the rental market was similarly subdued. If the 6-month Euribor should reach a level of nearly 4 percent by the middle of next year, as it is sometimes predicted, then even the cash flows from rental apartments acquired in the second half of 2021 may remain very marginally positive, in turn encouraging rental investments to be at least partly thrown in among sales offers. Soon, in the case of several more exclusive apartments, it is likely that renting such properties may turn out to be cheaper, month-on-month, than owning them on the back of a loan.

With the construction market, according to Arco Vara information, it can already be observed that construction prices of apartment buildings are at a similar level as before the Ukrainian war began, while the construction of detached houses works out also already cheaper than in the summer period, especially against the background of material price changes, characterizing the difficult situation of the construction sector in the coming year 2023.

*Offers, Pakkumised in Estonian, refers in the Estonian media to properties listed, ie. offered for sale, and not to demand-side offers made by potential buyers, as in the US and UK markets.

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