Realtor: Estonian tax changes to increase people's borrowing capacity
As a result of tax changes that took effect in Estonia this year, many potential property buyers who previously did not qualify for a home loan will become eligible as borrowers, real estate agency 1Partner Kinnisvara managing director Martin Vahter said on Tuesday.
"The tax amendments that took effect from the new year will leave €50-60 more in the hands of thousand of individuals, and that will raise many customers to a level where they become eligible for a loan with banks," Vahter said in a press release. "In addition, the economic growth in general will boost the numbers of the middle class. A big portion of the free money will go towards improving one's living conditions, and that will make the rental market and the lower-end apartment market even more active."
Construction costs are set to increase further in 2018 as a result of an increase in the numbers of state-financed and private sector construction projects.
"The state is set to place major resources in construction projects," Vaher noted. "€80 million of reconstruction support from Kredex will also be placed on the market over the next two years. At the same time, the private sector is building actively. The result is an increase in construction and reconstruction prices."
Selling prices, meanwhile, are not expected to increase much, with the price increase in Tallinn likely to remain within the limits of inflation.
As a result of growing construction prices and stable selling prices, many property developments are doomed to end in insolvency this year, Vahter believed.
"Not all projects succeed in the best of times either, and it will be the same this year as well, with some developments going bankrupt or being frozen," she described. "As banks are cautious giving money to new developments, that void wil be filled by crowdfunding, and people should consider further what risks are being taken."
Editor: Aili Vahtla