Estonian Property Owners’ “Golden Handcuffs”

The proportion of property owners in Estonia seems to be declining somewhat, despite a strong desire in Estonia to be a property owner, according to a report in Estonian business newspaper Äripaev. The article, by Silvia Kruusmaa, goes on to say that this may actually have a positive dimension, due to its impact on both the rental and labour markets.

During the peak years of 2001-2005, the percentage of householders who were home owners was calculated at 90 per cent; however this dropped by some three per cent up to 2009, according to the article. Nonetheless, in world terms the proportion of homeowners is still high, writes Silvia.

Whilst Estonians clearly prefer to be owners than renters, a large proportion of home ownership can be bad for an economy, she says.

The European countries where the strongest impact on the real estate market has been felt are those where high levels of ownership are to be found, including Estonia, Latvia and Lithuania, writes Silvia.

Meanwhile, a high proportion of homeowners are dependent on the real estate sector for their jobs, and countries with a fast growing rate of ownership also tend to have fast growing rates of unemployment, Silvia goes on.

Furthermore, Silvia writes, unemployed homeowners are effectively tied to the biggest investment of their life, ie. real estate, and thus have less job mobility.

According to Swedbank financial affairs private information manager Piret Suitsu, to ensure an active rental market and the provision of different living places, it is necessary to have a more mobile labour market, and at the same time enable people to have a greater satisfaction with their living place.

“It is unfortunately the case today that high rents mean that job offers in another location are not viable as the living costs will take up too much of a bite in the household budget”, Piret explains.

“The housing loan volume acquired during the boom years is high, but recipients have become the owners of ‘golden handcuffs’, which do not favour mobility” she goes on.

Real estate expert Tõnu Toompark states his surprise in the article that the volume of owners during the real estate boom did not grow hugely.

According to Tõnu the real estate and economic crisis had an effect on the numbers of owners in the sense that volumes of rental properties and tenants could be improved.

Meanwhile Real Estate brokers’ Arco Vara CEO Lembit Tampere claims in the article that such a high level of home ownership is not realistic in Estonia. “Clearly there has to be a rise in proportion of rental apartments, and the reason for this is to a certain extent our artificially high level of home ownership, going back to 1991 [and the restoration of independence]”, he says.

The full Äripaev article (in Estonian) can be read here.

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