Some experts see signs of real estate market recovery

Real estate and rental prices in Estonia have increased the most in the EU.
Real estate and rental prices in Estonia have increased the most in the EU. Source: Ken Mürk/ERR

Construction prices rose over the second quarter on-year but experts are divided on whether there are signs of recovery in both the construction and real estate markets.

The construction price index rose by 6.8 percent in the second quarter of 2023 but it dropped by 0.5 percent in comparison to the first quarter of the year. The price of materials was mostly the reason for the changes.

Construction company Merko Ehitus' Financial Manager Urmas Somelar said the slight drop in prices will not continue.

"From our point of view, these price drops will not last, they are temporary, one could say seasonal, and at the moment they are more or less compensated by rising salaries. So I would not dare make an assumption that construction prices could fall today," he told Friday's "Aktuaalne kaamera".

Somelar said he sees no recovery in the residential real estate market.

"There has been a revival in public procurement, especially in terms of military procurement, but elsewhere such a recovery is not very visible," he said.

But real estate company LVM Kinnisvara's board member Ingmar Saksing does not agree. He believes the downturn is coming to an end.

"The customer will receive offers again. If half a year ago there was a situation where for 10 requests at best one or two offers were received, today the situation has changed in the sense that builders are seeing interest in starting new developments," said Saksing.

Bank of Estonia Economist Taavi Raudsaar agreed the sector is starting to recover.

"With the arrival of spring and summer, the real estate market has revived somewhat. If you look at new development versus already existing dwellings, the share of new developments in transactions has always remained at about a quarter. In the meantime, it has grown a bit," he said.

Saksing said prices have not yet started to rise significantly.

"There is room for trading, but on a wider scale, prices are not lower, it's just that the market has been more passive in the first quarter. Today we see a more active market with more active price negotiations from both the buyer and seller sides," he said.


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Editor: Merili Nael, Helen Wright

Source: Aktuaalne kaamera

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