Statistics: Estonian Economy Only 16 Per Cent Below Boom Years Peak

After two years of deep recession, further evidence of a return to the earlier days of economic growth, when using GDP per capita as an indicator, has been provided by Tõnu Toompark’s real estate blog.

Tõnu writes that the downturn began in the first quarter of 2008 and lasted until the end of the second quarter of 2010, when the statistical data began to show the first positive growth figures, at 3.1 per cent.

This growth trend generally continued throughout 2010 and in 2011 looks set to see a growth of between 3.6 and 4.0 per cent both for private and public sectors, according to Tõnu.

Thus the internal economy is moving towards pre-crash 2007 levels, and in fact requires a further growth of 16 per cent to reach it.

The original post (in Estonian) including graphs showing changes in GDP per capita over the last ten years can be viewed here.

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Tallinn Property Price Index Unchanged

As recently posted on this blog, there was a recent blip upwards  in the otherwise generally stagnant level of property prices in Tallinn, at least according to real estate portal kv.ee‘s index of prices. It seems that things have reverted to how they had been during the last months of 2011 however, with the index standing at 62.2 as of today (down from 62.8 last month). This is notwithstanding the fact that more flats and houses seem to have appeared on the market.

According to real estate expert Tõnu Toompark’s blog,  this figure stands at some 2.5 per cent lower than the figure this time last year, and has bottomed out, though this doesn’t mean any upturn is imminent just yet.

Since the beginning of last year, successive real estate offers started to be added to the kv.ee portal. This peaked in the summer when the number of offers stood at over 20 000. The number of offers began to fall the following winter, reaching a level of 18 700 at the end of the year. Since then, offers started to grow week on week, and today stand at a level of 19 319.

There has been a number of newly-built developments entering the market, but these are often being snapped up quite quickly, thus not impacting the number of current offers level all that much. In general, demand seems to seasonally lag behing supply somewhat, so the coming spring is likely to bring an upsurge in buying and selling activity; the slump in transaction numbers in winter hasn’t helped existing sales offers to be realised.

The kv.ee index, which commenced on 18 February, 2008 (i.e. this is the date on which the value of the index is calibrated at 100) measures the week on week change in residential real estate prices in Estonia. The data has been measured back anachronistically to 1 January, 2005, when the index stood at an “all time” low of 49.9. The “all time” high came on 7 May, 2007, when it stood at 108. Following the economic downturn of 2008 onwards, the index reached a low point (to date) of 61.4 on two occasions, on 5 September and 27 October, 2010.

Tõnu’s original article (in Estonian) is available here.

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Statistics Office – No Recovery In Estonian Construction in 2010

As noted in an earlier post, the third quarter of 2010 showed no signs of recovery in the construction sector, at least if figures released by the Estonian statistical office are anything to go by.

According to data released by the office today, this has not changed, and in fact there has been a fall in construction value for the fourth quarter. The value of Estonian construction companies’ production in 2010 both in Estonia and other countries totalled 1.3 billion Euros (20.1 billion Kroons), a figure which is some 13 per cent lower than the previous year. The trend towards a fall in the construction sector has unsurprisingly been continuing since the start of the downturn in 2008.

This figure can be separated between new buildings, which constituted 740 million Euros, and other developments and facilities, which accounted for the remaining 542 million Euros (or 12 and 8 billion Kroons respectively). In comparison with 2009, this represented a fall of 17 per cent in new buildings and a fall of 6 per cent in other facilities construction.

The fall in construction activity was particularly due to a fall in the local residential construction market. However, the volume of construction by Estonian companies in the foreign market actually increased by 12%, solely due to new building work. Indeed it seems that foreign construction has been a burgeoning area in recent years, in 2010 making up a total of 11% of building construction volume.

The building registry data also shows that 2010 saw the completion of construction of 2324 new units, some 702 less than 2009. Furthermore, the bulk of newly-constructed units were to be found in apartment blocks, about half of them being two- or three-room apartments. However, since 2008 the proportion of dwellings to be found in apartment buildings has been decreasing, which has hasd the effect of causing the average size of dwelling places to increase. As of 2010 this stood at 102 square metres, the highest figure over the last nine years. Unsurprisingly, Tallinn saw the biggest share of new residential developments, followed by districts bordering Tallinn, and also Tartu county.

Despite the continued fall in the volume of construction noted above, the very fact that new buildings are being put up should lead to optimism in the construction industry, according to the report. Building permission was given for some 2600 dwellings in 2010, an increase of about 25 per cent on the previous year.

A further 815 permissions were granted for the construction of non-residential buildings over the same period, comprising 425 000 square metres of useful space. Most of this was taken up by new shop, office and industrial uses. Nevertheless, there was actually a fall in non-residential permissions, both in terms of floor space and cubic capacity.

In conclusion, and to flesh out our post concerning the third quarter of 2010, it would appear that the fourth quarter of 2010 on its own saw no signs of recovery in the construction sector, and in fact saw a drop on the previous quarter. Whereas the third quarter saw a total construction value of 364.6 million Euros, the fourth quarter saw only a figure of 344 million Euros, in fact a 5 per cent fall on the corresponding quarter for 2009 (the third quarters of 2009 and 2010 respectively recorded similar figures, by contrast).

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Tallinn Property Price Rise – Temporary But Advantageous?

According to real estate portal kv.ee, residential offer prices in Estonia, following a plateau where prices remained static, have seen a sudden increase, as reported on Tõnu Toompark’s blog. Kv.ee‘s own index of real estate prices shows a level of 62.8, as against a low of less than 61.5 in the autumn. However, this is still 1.7% lower than the same period a year ago.

This would appear on the surface to be good news since, as reported in this blog last November, notwithstanding many real estate agents’ desire to see a rise in prices, the KV index of real estate prices had continued to fall through the course of 2010, and as we also reported, the beginning of the year, with the adoption of the Euro, didn’t see any rise in prices either.

In absolute terms this means that the average offer price as listed in the kv.ee portal stands at 825 Euros per square metre (a year ago, real estate brokers were on average asking for 839 Euros per square metre for residential property).

However, despite the recent rise in prices, Tõnu goes on to argue, caution is of the essence, as ever. Last week’s price jump probably doesn’t represent a sudden and lasting change in the real estate market. What it does however relate to is that sales have been coming from a succession of new real estate developments, and this in turn has skewed the average price figures upward somewhat.

Furthermore, a minority of real estate brokers, have awoken from their winter ‘hibernation’ with the changeover to the Euro, and rounded up unsymmetrical looking figures which had been converted from Kroons into Euros into nicer looking and rounder new Euro prices; this has added to the effect, says Tõnu.

Experience shows that conditions where the market is fairly dormant can lead to a situation where the buyer is king. This means that the practice of rounding up prices that we have seen doesn’t mean the transaction prices will necessarily be met, but rather an increase in bargaining leeway is made possible, which savvy buyers can turn to their advantage.

The kv.ee index, which commenced on 18 February, 2008 (i.e. this is the date on which the value of the index is calibrated at 100) measures the week on week change in residential real estate prices in Estonia. The data has been measured  back anachronistically to 1 January, 2005, when the index stood at an all time low of 49.9. The all time high came on 7 May, 2007, when it stood at 108. Following the economic downturn of 2008 onwards, the index reached a low point (to date) of 61.4 on two occasions, on 5 September and 27 October, 2010.

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