Rising Euribor, soaring inflation and the general cost of living have started to cool the real estate market in Estonia's second largest city Tartu. Properties with local gas or other expensive forms of heating have started hitting the market.
While people still took an interest in all manner of real estate in Tartu this summer, many have postponed plans to buy their own home by now.
"People are taking the time to wait and see, postponing decisions until spring. Even those who have the money are hesitant and tend to put decisions off," said Siim Peets, broker for Arco Vara.
The number of real estate transactions reflects this downward trend. Härmo Haljaste, executive manager of Kaanon Real Estate, said that the number of transactions is down 30 percent compared to last year.
"The number of properties on the market has been growing. Because the real estate market reacts with a delay, this will likely be reflected in prices after a while – transaction volumes are falling and prices will follow," Haljaste said.
Siim Peets said properties in areas that have gas heating or other expensive energy solutions have started hitting the market.
"The Pärna allee area where houses have local gas heating – they are somewhat problematic. While we used to see next to no offers in the area, the number of properties for sale has been growing since summer and prices have come down. The type of heating a building uses is very important," Peets explained.
The realtors said that so-called second hand apartments, especially those in sleeping districts, are also selling less. This suggests that people's interest in new developments has not cooled.
"Rather, the question is what can people afford today. In a situation where prices have been climbing rapidly for new developments, people's credit, considering soaring interest rates, is increasingly becoming the deciding factor. But a closer look at transactions statistics reveals that because fewer new developments are hitting the marker, their relative importance has fallen."
The rental market is a reflection of the purchase and sale market, with offers up around 50 percent since spring, while demand is dwindling. A more or less decent apartment can be rented for €400 plus utilities in Tartu.
"People are also looking at utility costs that often become the deciding factor. While the rental price might be tempting, utility costs can be considerable. Or vice versa – low utility costs reflecting in high rent but still sensible total expenses," Peets said.
Editor: Marcus Turovski