Andree Raid: Property sellers need to return to world of price expectations
Sellers of real estate should bring their price expectations back to reality. Rising heating costs, general price hikes and a spiraling Euro interest rate are all making it more difficult for potential home buyers to make a purchase, Andree Raid writes.
The housing market is beginning to cool. We anticipate growing heating expenses, continuous interest rate hikes and a moderate recession in the near future, which brings a decline in commercial activity.
Despite the pessimistic outlook, many sellers on the residential sales side are still unaware that apartment prices have stopped rising since the spring of last year.
Since May 2022, the price of apartments in Tallinn stayed unchanged between €2,900 and €3,000 per square meter.
On the real estate market, it is becoming increasingly clear that the current price level is not acceptable to buyers. Nonetheless, there are also real estate dealers on the market who, as though they believe prices will continue to rise, are "fishing" at high prices, i.e. attempting to find a fool for an apartment priced 15-30 percent above the market average.
This pricing model could be effective if home pricing was growing; however, apartment prices are trending downwards.
Circumstances have changed
In the changed circumstances, offers priced above market levels are no longer viable.
Rising heating bills, general price increases and a sharp rise in the euro interest rate are all making a potential property purchase more expensive and difficult. In a rapidly valuing environment, even the smallest purchase must be carefully considered, let alone purchasing a home with long-term large financial commitments.
While the media are writing and speculating a potential decline in home values, apartment prices are rather stable and there are no indications of a big decline.
While pessimists predict a 10-20 percent drop in apartment prices, optimists predict that prices will remain near fall levels, but no one predicts a price increase in the next twelve months.
High price means no deal
If property sellers want to close a deal, they must lower their unrealistic price expectations.
Offers for sale must be priced at market levels, not above. In a declining market, goods must be priced even below the market level in order to sell.
Real estate sellers need to start pricing from the right level in the property sales today. Otherwise, the deal will not go through.
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Editor: Kristina Kersa