Estonia's real estate market showing signs of recovery

Apartment buildings in Tallinn.
Apartment buildings in Tallinn. Source: Siim Lõvi/ERR

Experts see signs of recovery in the real estate market and there has been a recent uptick in transactions. However, developers are still acting cautiously, and fewer building permits are being requested.

Real estate agency 1Partner Kinnisvara CEO Martin Vahter said, during the financial downturn, many investors pressed pause for six months hoping to grab a bargain, but few were forthcoming.

"Since this aftermarket price drop has still been 10-15 percent, the numbers are starting to fall. While the rental yields for apartments in the city center used to be 4 to 5 percent, in the suburbs 5 to 6 percent, today it is already possible to buy apartments on the market with rental yields of 6 percent in Lasnamäe, for example, and even higher," Vahter told Monday's "Aktuaalne kaamera".

SEB Bank analyst Mihkel Nestor said interest in loans is on the rise

"If you look at the statistics of the Tallinn apartment market. If at the end of last year sales volumes were down by 30-40 percent year-on-year in some places, they have now come to somewhere around minus 10 percent. But we also see that more and more people are coming to the bank for a home loan," he said.

Mihkel Nestor. Source: Priit Mürk/ERR

However, permits for new housing developments are not being lodged. In the first quarter of 2023, applications dropped by almost a quarter compared to the same time last year.

"The very sharp fall in sales in the autumn made developers cautious. Looking ahead, I believe that developers will also take some time to think about how much it makes sense to put the next projects on the market, but if we really get back to where we were before the downturn in sales, I believe that they will be ready to come out with these projects quite quickly," said Nestor.

Vahter said uncertainty leads to a cautious market.

"We have a couple of projects in the start-up phase where we have a building permit, but have not yet decided whether or not to start them. There is such uncertainty and we don't yet know exactly at what prices, how big the pre-sales would have to be to successfully complete the development. These things are all still open," said Vahter.

New build apartment block. Source: Siim Lõvi /ERR

Real estate agency Uus maa's Risto Vähi said there will be few new developments on the market this year.

"This year is going to be a year of trying to sell what is left. New developments will still be started, but not as many as before, and this year will be a rather quiet time in terms of new developments," he said.


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Editor: Helen Wright, Barbara Oja

Source: Aktuaalne kaamera

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