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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