Real estate developers are cautious when making plans for the near future as the Estonian market has cooled and construction costs continue to rise. But they believe,in the long term, the outlook is more positive.
Material prices were the main reason behind the Estonian construction price index rise, said Ivo Volkov, head of Merko Estonia. But while some materials have become cheaper, construction is still expensive, he said.
"Wage pressure is strong and energy prices are high. Even if material prices stop rising at this rate, other components, I suspect, will not allow the index to fall. I see no reason why the construction price should be below inflation. Inflation is unanimously predicted to be around 10 percent [this year]," Volkov told Tuesday's "Aktuaalne kaamera".
Deveoper Hepsor's board member Kristjan Mit said peak construction prices have been reached and they are now starting to fall.
"[But] I dare say it will be at this level for some time now. But given inflation and wage growth, I believe that in a year's time, construction prices will be higher than they are today," he said.
Fewer expensive new developments are being sold as customers have less money, said Volkov.
The number of new developments on offer is also decreasing.
"Yes, definitely [decreasing]. The plans we made two years ago, about starting the next phases of development, those plans definitely need to be reviewed," said Volkov.
Both Volkov and Mitt said the volume of construction will fall this year. But builders and developers are more optimistic when thinking about the long-term.
Last year, a record number of building permit applications were submitted in Tallinn — 33 percent more than in 2021.
Ivari Rannama, head of Tallinn City Planning Department, said: "We do not see any let-up in applications and submitted projects. In our view, it's moving steadily — at the start of the end of the year was a quieter period, which is normal, but there has been quite a lot of activity over the last few weeks."
Editor: Marko Tooming, Helen Wright
Source: Aktuaalne kaamera