Behind the country’s slow economic growth, Estonia’s property is booming (Photo: Vikkies )
Estonia may not spring to mind for Western buyers when it comes to holiday homes abroad or overseas investment. Indeed, the country’s economy growth forecast was lowered at the end of 2013 to 1 per cent for the year as expansion fell below expectations. But the weak economic growth hides a strong housing market, according to figures accumulated by Global Property Guide , with prices and transactions both racing upwards.
This is not the first time the words “Estonia” and “real estate boom” have been in the same sentence, though: house prices exploded 36 per cent between 2004 and 2006 before the global financial crisis struck.
In the wake of the economic crash, Estonian property prices fell by increasingly large amounts until 2010, when prices began to turn around. 30 per cent price drops turned into 4.1 per cent price rises, building up to 2011, when values surged 12.3 per cent in the final quarter of the year, according to Knight Frank’s global house price index – the second highest annual growth in the world, behind only Brazil.
Momentum continued to build last year, according to Ober Haus Real Estate Advisors. Indeed, values of apartments rocketed 13.75 per cent in November 2013 year-on-year. The capital of Tallinn enjoyed some of the strongest increases, with apartment prices in the city climbing 4.31 per cent in the final quarter – and 15.5 per cent year-on-year. Across the country, excluding Tallinn, the average sales price of dwellings jumped 3.8 per cent to €527.1 per square metre.
Statistics Estonia backs up the scale of the country’s growth, with data revealing an 8.43 per cent annual increase in average sales prices across the country in the three months to september 2013 year-on-year.
Rising prices, though, are nothing without demand, and Estonia is no slouch there, either: in the third quarter of 2013, the total number of purchase-sale contracts of real estate in Estonia increased 15.6 per cent year-on-year, according to Global Property Guide. The value of contracts has also climbed 22.8 per cent across the same period, reaching a total of €555.2 million.
With research from Eurostat ranking Estonia’s real estate as having one of the lowest taxation rates in Europe, it is perhaps no surprise that Russian buyers are swooping upon the country. Indeed, Scandinavians and Russians fuelled demand for apartments in 2013, according to agents, with rising prices leaving some areas of the market only open to overseas buyers.
Narva-Jõesu, head of Estonia’s northern region of Domus Kinnisvara, is the hotspot for Russian investment. Indeed, 95 per cent of one development (Sunset Residence) went to Russian buyers, while 12.8 per cent of the wider area’s housing is owned by foreigners. In Tallinn, on the other hand, most sales went to Finnish buyers.
With construction rising 30.2 per cent in the third quarter of 2013 and the country’s economy still improving, the Estonian housing boom is expected to grow even stronger in 2014. The question is: how many buyers will be talking about it this time next year?
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