Colliers: 2011 Best Year For Estonian Commercial Real Estate

Compared with the first quarter of 2010, the number of commerical real estate deals in Estonia has fallen by 18 per cent. However, their size and value has actually increased.

The monthly average transaction value has risen by 48 per cent, from 39 300 Euros to 58 100 Euros, according to a survey carried out by global real estate services corporation Colliers in March, as reported on Estonian business news site E24 Majandus. The company furthermore predicts that commercial real estate investments this year will make it the all-time most successful year in the history of the sector.

Company analysts confirm that the availability of modern office space continues to fall, and that offers of spacious office space to rent in the marketplace may dry up.

“Our own cooperation partners have demonstrated that plans for new office space construction are day by day becoming more realistic. A good example is the planned new G4S business development which Arco Vara Real Estate acquired at the end of 2010”, comments Colliers’ investment and evaluation manager Margus Tinno.

“Various developers are expressing a clear interest in properties with strategic locations in the central business district”, he adds.

The Colliers survey has shown that demand for rented office space is continuing to be carried by the IT and Telecoms sectors, which uses on the whole the greatest area of rental space.

Foreign investor confidence has recovered in Estonian real estate, as is demonstrated by Colliers’ estimates of the volume of planned and completed transactions in relation to shopping centres. This increased activity is exemplified by an agreement of 105 million Euros (still to be settled) for the Kristiine Shopping centre.

“Finnish captial-based Prisma Family Market has already been renovating and extending a number of its Tallinn hypermarkets for some time and commencement of the construction of a second hypermarket in Tartu has already been announced. At the same time a new Lithuanian-owned Maxima hypermarket is being planned in Pärnu. In a rejuvenating economy, conditions in the market clearly tighten up between the competing retail chains” Says Tinno.

Growing demand for warehouse and industrial space will be quickly offset by a rapid rise in construction prices. Estimates by Colliers analysts imply that new developments are breaking even at 4-4.5 Euros per square metre – this exceeds the level for 2009 by as much as 50 per cent and is still too expensive for many potential tenants today, despite the recovery of many businesses. Evidently those businesses which are enjoying a rapid expansion are expected to start to approach developers’ price expectations.

“The statistics for the first quarter of 2011 are very revealing – together with the transaction concerning the Kristiine Centre , the volume of real estate transactions has already exceeded figures for 2010 by 150 per cent. It is thought that some major commercial real estate portfolio talks are in progress, for example the East Capital and Capfeld deals, which can at the least mean that the commercial property  forecast for Estonia is for the most successful year in this sector”,  Tinno further states.

The original article (in Estonian) can be viewed here.

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UK-style Tallinn property agency Goodson & Red doubles in size

Hope you don’t mind us bragging a bit about some thrilling developments our company is going through.

It is an exciting time for Goodson & Red Tallinn property consultants and managers as the company expands to include four highly experienced team members, doubling in size, making us ready and eager to bring a fresh approach and set new standards for our industry.

We are therefore delighted to welcome Andrew Whyte, Kati Lips, Erki Kommussaar and Tuuli Edur on board. At Goodson & Red we embrace change and are constantly challenging tradition, because we have a strong desire to improve the way our industry operates. With Andrew, Kati, Tuuli and Erki we are laying the cornerstone for building up even stronger buying, selling, and investment advisory services, as well as property brokerage services for sellers. Additionally, we believe the synergy with our existing letting and management team will prove to be priceless.

Kati, Tuuli, Erki and Andrew have over 30 years combined comprehensive experience in property buying, selling, letting and rental advisory and brokerage services. Kati Lips has been working in the real estate field since 2000. At Ober-Haus, one of the biggest real estate companies in Estonia and part of the Realia Group, she built up an impressive array of letting advisory and rental brokerage services and later became a leading selling advisor and agent. Tuuli Edur started in real estate about 13 years ago (including 9 years with Rime, another leading property agent in Estonia). During her years at Rime and Ober-Haus she was recognized by both companies as the top performing agent many times, and has found her niche as a specialist and leading selling advisor and agent for new homes, developments, land and houses. Erki Kommussaar has specialised as a selling advisor and agent, and focused on new homes, developments and distressed properties at Ober-Haus . He has been working closely with the banks to help banks’ clients to sell their properties. Andrew Whyte joined Goodson and Red in 2010 with the remit of building and fostering partnerships with UK and other overseas agencies and acting a broker for UK and other property investors. He is also responsible for updating the Tallinn Property blog and English language aspects of our website. He is a UK national with several years’ experience in property investment. Overall, our team knows everything there is to know about property in central Tallinn.

Through more than eight years of consistency in one of the most active property markets in Eastern Europe, the joint UK-Estonian venture of Goodson & Red Property Consultancy (former RED Group Apartments) has developed an enviable reputation for in-depth market knowledge, expert, and considerate personal service. Although Goodson & Red is a full service property agency, in Tallinn and throughout the whole of Estonia we are widely regarded as the market leader in our niche of the property market: serviced short-lets, mid- and long-term rentals, management services, home search, as well as buy-to-let consultancy. Currently Goodson & Red has almost 100 apartments under management.

Goodson and Red seeks to set the benchmark by which other property agents in Estonia will measure themselves, in terms of vision, quality of service, clarity and honesty.

You can meet our new property consultants Andrew Whyte, Kati Lips, Tuuli Edur and Erki Kommussaar at Goodson & Red Property Consultancy site.

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Estonian Construction Volume Still Falling

According to Estonian Statistics Office data, the index of construction volume for the fourth quarter of 2010 fell by 4.7 per cent compared with the same period a year ago, as reported on Tõnu Toompark’s Adaur blog.

Aside from the third quarter of 2010 when there was a small 1.1 per cent year on year increase, this has been the twelfth successive quarter in which the index has declined.

One small positive detail is the fact that the rate of decline has slowed somewhat, Tõnu says.

The full article (in Estonian) can be viewed here.

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Tallinn Real Estate Market Report First Quarter 2011

Tallinn Property and Goodson & Red are pleased to announce that our latest Tallinn Property and Rental Market Quarterly Review is ready.

Covering all developments in the first quarter of 2011, as always the review contains an in-depth look at the Tallinn residential market, the situation regarding mortgage loans, information on average asking and transactional prices, the current state of the central Tallinn rental market, and also offers invaluable sample transactions and advice on rental business considerations.

In case the link above did not work you can copy and paste the following to your address bar: http://www.goodsonandred.com/sharedfolder/tallinn-property-market/marketreview-tallinn-real-estate-q1-2011-web180411.pdf  

The review comes at an exciting time for us as the company expands to include four highly experienced team members. You can meet our new property consultants and agents at Goodson & Red Property Consultancy site. Whatever your requirements for Tallinn property, Andrew, Kati, Tuuli and Erki are there to help you achieve your aims.

We would very much like to hear your views regarding the Tallinn or Estonian property market. Furthermore, if you have any suggestions regarding topics, please do not hesitate to leave your comment or tweet us, or write on our wall.

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Residential Real Estate Offers In Estonia Showing An Increase

Real estate portal KV.ee’s index of property prices in Estonia seems to be on a horizontal plane at the moment, according to Tõnu Toompark’s Adaur blog. The Index currently stands at 61.9 points, 1.7 per cent lower than this time last year.

However, in view of an inflation rate that exceeds the 5 per cent mark, the true figure for average real estate prices in Estonia is even less than this level would suggest.

The index doesn’t seem to have risen in accordance with the arrival of the Euro. Rather, the very arrival of the Euro seems to have cut the number of transactions and brought the housing market to something of a standstill, writes Tõnu.

The number of bids according to the KV.ee portal increased steadily from the beginning  of last year until the autumn. At its peak in September 2010, the portal reported 20 500 residential bids. Thereafter there was a brief decline in the number of offers until the new year, when they gradually started to pick up again. These were largely constituted by those sellers who were anticipating higher prices with the arrival of the Euro and so held off putting their properties on the market until then, but the trend was affected by a shrinking number of transactions in January and February 2011 due to the seasonally slowing market.

The current number of residential offers on KV.ee stands at 19 500, or 11 per cent more than a year ago.

To sum up, it is only a matter of time until the decline in residential prices in smaller regional areas stops. When this happens, the KV.ee index should start to rise again. Thus the fall in offer prices is sure to finish in due course, as the effect of higher transaction prices kicks in.

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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ECB Rate Increase To 1.25%: Effects On Estonian Property Market

The European Central Bank (ECB)’s decision to raise the base lending rate to 1.25% on Thursday last (7th April) perhaps comes as no surprise, and it seems likely that further rises are due for the course of 2011.

Since many Estonians hold their mortgages in variable rate packages which follow the base rate, this means an increase in repayments (approximately 160 Euros per year, according to Baltic Business News, quoting business publication Äripäev).

However it needn’t mean that fixed lending rates in Estonian high street banks will go up just yet, since banks are prepared to absorb the increase in their margins. The current margin average is some two per cent (i.e. on top of the base rate) down from 2.4-2.6 per cent in 2009, but the all time typical margin stands at only 0.5 per cent. Therefore there is still plenty of room for a reduction of margins, rather than an increase in bank rates. This is significant in the rejuvenation of the Estonian property market after the recession of 2008-2010, since it means bank rates should remain at an affordable level for the meantime, and not act as a barrier to potential homeloan customers.

The increase in base rate is likely nevertheless to impact upwards on the Euribor index of average European banking interest rates.

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Personal Bank Deposits In Estonia Seven Times Greater Than Loans

Deposits in Estonian banks have been steadily increasing, so writes Tõnu Toompark on his blog, adaur.ee. Estonian data for February shows a total value of bank deposits of just under 10.5 billion Euros, of which 5.9 billion is held in on request accounts which can be accessed with little or no notice.

Of this total balance, some 4.2 billion euros is held by private individuals, of which 2.1 billion Euros, i.e. about a half, can be readily accessed.

Annual personal loans turnover (constituting home, customer and other loans) peaked in 2007 at the height of the real estate boom, at a level which was the same as the actual balance of deposits (in other words the banks loaned out in 2007 the same amount as they held in deposits – and the total loan balance was more like twice the level that was held in deposits).

However the position by Feburary 2011 was that, in the aftermath of the downturn and severe austerity measures, banks’ much more stringent criteria for granting loans meant that loan turnover had plummeted to a mere 15 per cent of the balance of deposits.

The full article (in Estonian) including graphs plotting changes in loan balance, turnover and the relationship between the two can be viewed here.

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Construction Insider: Tallinn Property Market Suffering From An Offers “Drought”

Astlanda OÜ board member Kajar Kruus has provided an interesting perspective on the current situation in the real estate market in Tallinn, the indicators and reasons behind its seeming upturn as well as shedding some light on the realities behind the downturn.

Speaking to Tõnu Toompark’s blog, Mr Kruus said that, in a sense, the crisis had been something of an illusion, since the high prices that sellers have been asking for were unrealistic, and currently there is a need for affordable housing in various market segments.

Today the situation regarding the real estate market has changed, he goes on to say.  It’s even possible to state that there was a critical shortage of apartments in the real estate market in 2010. Good deals had already been snapped up very quickly, and virtually no new housing was replacing this, due to a lack of finance for purchases, he says.

Times have changed however, and money is now flowing into the real estate market as the spring waters flow into the sea, writes Mr Kruus somewhat poetically. Money is being offered to developers and campaings have been launched, presumably by the banks, targeting potential loans customers. There is a stock of new developments which are being sold out even more quickly than developers’ expectations, Mr Kruus states. Behind these successful sales lies a supply of standard flats with the better, erstwhile planning standards, reasonable prices and other thoughtful solutions attached to them, Mr Kruus says.

Positive examples are not hard to find, he goes on. A development in the Kalamaja district of Tallinn, units of which started selling in December 2010, immediately saw sales of a quarter of available flats, according to Mr. Kruus. Similarly, a development comprising 96 apartments in the Lasnamäe district which started in January has also seen a quarter of the units sold or reserved, he says.

The sale of the Toompark development on the fringes of the Kesklinn (city centre) began four months ago. Units there carry a price tag of around 1 690 Euros per square metre, and about half of them (37 in total) have been sold, Mr. Kruus states.

Reasonable prices for new apartments seem to have remained stable. However, the price of construction has increased by some 20-30% and seems likely to continue to do so, which could lead to inflated prices in the future, writes Mr. Kruus.

Today’s entry into the market of new residential projects and their rapid sales take-up have exacerbated the housing shortage, Mr Kruus believes. The property market in Tallinn and its environs is now ready to take on some 1000-1500 new apartments, he goes on. Furthermore, if the progress continues at today’s pace, next year could see a volume of new apartments which is as much as 15-20 per cent higher than today, he states.

Mr Kruus sums up by saying that the real estate market has picked up due to a demand for new projects. Furthermore he feels that the contemporary buyer wants a high quality apartment in a good location – something which the market overlooked during the boom years.

For the full report (in Estonian) see Tõnu Toompark’s blog here.

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