The real estate market in Pärnu, Estonia's fourth largest city, has changed in recent years, as Estonians from outside the summer capital have supplanted Finns as the primary buyers of apartments in town.
While real estate purchases are down significantly compared with last year or the first quarter of this year, it certainly isn't the case that no new apartments are being built whatsoever. Construction work is in full swing in several locations in Pärnu.
Interest in buying has been curbed by the rise in the Euribor – or Euro Interbank Offered Rate, a figure tied to many loans in Estonia –however Russia's ongoing war in Ukraine has made people more cautious as well.
Nearly 150 new apartments will be finished being built in the coastal city next year, up to 40 percent of which have already been sold.
"In terms of the Euribor, it seems as though that ceiling has been reached, but what everyone's said is that we're not going back to zero [percent]," said Janno Peterson, head of the Brokerage Service at Kinnisvaraekspert's Pärnu office.
"In reality, this high Euribor rate has slashed buyers' purchasing power by 20 percent," the real estate company representative pointed out. "Should this Euribor remain steady or slowly start to come down, then I'm hoping that maybe 10 percent of that will be returned over the years ahead."
Peterson added that it's important to bear in mind that it's people in the 26-35 age group that take out 20-year mortgages, and that this age group is due to decrease significantly in size in the coming years.
But who is buying new apartments or houses in Pärnu?
"Pärnu is a unique city in that we still have quite a lot of outside buyers here, who buy more expensive real estate in the beach district and good locations," Peterson said.
"With the Finns, in better times there were 160 buyers a year," he continued. "Then that [number] started falling; at one point it was down to 30 and 40. You could say that that generation is gone now; that generation is selling today. Now it's moreso businesspeople from Tallinn and Tartu buying themselves nice vacation homes."
LVM Kinnisvara board member Ingmar Saksing acknowledged that it's difficult to forecast when the economic recession will come to an end and the economy will rebound, but that it's definitely a good time to build.
"Construction prices have adjusted downward, and in this phase of slightly increased prices and at this level of reasonable construction prices, it's currently possible to start moving on projects," Saksing said.
"Likely not yet at the end of this year, but at the beginning of next year, I believe we'll be seeing new projects started on either side of the river," he added.
Editor: Aili Vahtla