Economic Growth In Estonia Continues, But Slows In Q2 2012

According to a recent report on the Statistics Estonia site, economic growth in Estonia grew by two per cent y-o-y to Q2 2012.

However, GDP only grew by 0.4 per cent, when seasonal and work-day factors are taken into account, between Q1 and Q2.

Most of the growth came from the construction, information and communication and administrative and support service areas, whereas manufacturing, the biggest single sector, had a negligble effect on growth, according to the report.

The report stated that reductions in value added in the real estate sector, going back to Q3 of 2010, had an impact on this slowing. Normalisation after the adoption of the Euro (which saw a rise in real estate prices due to ’rounding up’ around the time of the currency’s adoption in January 2011) and the rise in construction material prices may have been two causes of this.

This is not the final word on the matter from Statistics Estonia however; figures for Q1 and Q2 2012 growth will be re-estimated and published on the site on 7th September, the report stated.

The original report is available here.

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Real Estate Prices In Estonia See Fall In July 2012

According to a recent article in the Estonian Press Digest from News2Biz, July 2012 saw something of a fall in real estate prices in Estonia as a whole, but at the same time real purchasing power (in Tallinn) for those wishing to purchase property also fell.

Citing real estate giant Pindi Kinnisvara‘s index as falling by 5.4 per cent between June and July, the report also stated that the real purchasing power of a Tallinn resident earning an average wage would stretch to a property of 68 square metres in area.

The Pindi Index is based on the weighted average transactions across the 17 largest Estonian towns (Tallinn is of course the largest with over 400 000 inhabitants, whereas 17th placed town is Kiviõli in Ida-Virumaa with only a little over six and a half thousand souls).

The average price of apartments per square metre in June 2012 for the whole of Estonia was 886 Euros, falling to 838 Euros per square metre in July, according to the report.

Not surprisingly the lower prices were accompanied by a somewhat higher rate of transactions – 991 in July, compared with 934 the previous month (this only covers the 17 cities incorporated in the Pindi index) the report stated.

According to the article, residents of Tartu and Pärnu can stretch to apartments a little larger in size when measured by their purchasing power levels (at 73 and 84 square metres respectively).

The Pindi Index reached an all time peak in April 2007 at the height of the boom, and an all time low in July 2009 (624.2 Euros per square metre).

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Estonia’s National Air Carrier Sees An Increase In Passenger Numbers to July 2012

Notwithstanding national air carrier Estonian Air’s muhc-publicised financial problems, according to a recent report on the Baltic Busines News site, the airline has carried 52 per cent more passengers as of the end of July 2012 than at the same stage during the preceding year.

At the same time, the number of passengers taking regular flights from Tallinn increased 78.6 per cent y-o-y, according to the report.

92 136 passengers flew from Tallinn on regular flights, 91 983 of whom were on regular flights, the report continued, with 515 721 passengers travelling with Estonian Air through the first seven months.

The occupancy rate of flights not surprisingly increased y-o-y to July 2012 too, by 9.2 per cent y-o-y to 98.9 per cent occupancy, the report stated, whilst

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Statistics: Real Estate Investment In Estonia Increases 24 Per Cent Y-o-Y

According to a report by Tõnu Toompark on his adaur blog, investment in real estate in Estonia has increased by 24 per cent y-o-y to the first quarter of 2012.

Citing figures from the Estonian Statistics office, investments from  Estonian companies into plant and equipment fixed assets came to a value of 506 million Euros in the first quarter of 2012, writes Tõnu.

A bit less than a third of this total came in the real estate sector, including buildings and facilities acquisition, construction, repair work and the acquisition of land, Tõnu continues.

After a three year fall in investment in the real estate sector, the last five consecutive quarters have seen growth in investment, Tõnu writes.

The original article (in Estonian) together with diagrams illustrating investment levels in fixed assets including buildings, facilities, and land, and changes thereof, is here.

 

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Apartments For Rent In Tallinn Increase Y-o-Y Slightly In Number, Greater By Rent Price

There has been a y-o-y increase in rental prices in Tallinn of 18 per cent, to July 2012, according to Tõnu Toompark on his adaur blog.

This undoubtedly is connected with the short supply of rental properties in Tallinn at the moment.

According to Tõnu and citing data from real estate portal kv.ee, the volume of rental apartments on the market has increased y-o-y, but not by much, which may put a downward pressure on residential rental prices through the summer and autumn – as noted there has been a rise up to now.

Tõnu cites more data from kv.ee which states that there were 1 996 apartments up for rent on the portal in June, which is only a two per cent increase y-o-y.

However, the shortage in availablility of rental items is not as perceptible today as was the case a year ago, Tõnu continues.

This will be predominant in those areas of Tallinn where more apartments have come on to the rental market, which has happened in all districts. writes Tõnu, except North Tallinn (which includes Kalamaja and Kopli) the Soviet-era residential district of Mustamäe and the leafy, sought-after outer suburb of Nõmme. These three areas have seen a fall in the volume of rental apartments available (by as much as -37 per cent in the case of Nõmme).

Fallinn demand may be the result of rising rental asking prices (as well as the latter being the result of falling supply). The average rental asking price in Tallinn was a 6.10 Euros per square metre in July 2011; a year later that figure had risen to 7.20 Euros per square metre.

In any event this makes the rental market attractive for investors; a shortage of supply and rising rental levels mean a property could be let out very quickly and at higher prices, ensuring good cashflow.

The district of Tallinn with the highest rise in number of rental apartments available y-o-y to July 2012 was the residential suburb of Kristiine, according to Tõnu’s data, at 23 per cent. The city centre (which includes the Old Town) saw a 10 per cent rise in number of available apartments over the same period, from 736 to 806 items (also by far the highest total number of items of any region, as might be expected).

Outside of Tallinn, Pärnu saw an 18 per cent rise in apartments available for rent, whereas Tartu saw the opposite trend with a -26 per cent fall over the same period.

The figure for the whole of Estonia was a -4 per cent fall.

The original article (in Estonian) and data is here.

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Retail Sales In Estonia Continuing To Grow

More hopeful signs of economic recovery in Estonia comes with a recent report on the Statistics Estonia site which states that retail sales in Estonia increased by seven per cent y-o-y to June 2012.

Furthermore this trend has been continuing since March 2012; every month between March and June saw an increase in retail sales of between six and eight per cent, according to the report.

The total retail sales of goods of retail trade enterprises, to give the retail sector its full name, came to a value of 384.8 million Euros in June 2012, which represented about 80 per cent of the total revenues from sales of retail trade enterprises (484.9 million euros)* the report stated.

There was an apparent growth in all areas, but the sector with the biggest increase was pharmaceuticals and cosmetics (17 per cent) together with ‘non-specialized stores selling predominantly industrial goods’ (16 per cent) and ‘retail sales via mail order or the internet’ (15 per cent).

Retail sales in grocery stores grew six per cent y-o-y which was actually a lower figure than had been the case over the previous two months, but this was largely due to that sector starting from a higher reference base in June 2011 than some other sectors, the report stated.

The overall retail sales in retail trade enterprises month-on-month increase in June 2012 was three per cent at constant prices, and one per cent by seasonally and working-day adjusted data. 

Over the six month period January-June 2012 the report said that retail sales in retail trade enterprises increased by nine per cent at constant prices compared y-o-y.

The original report is available here.

Goodson & Red Tallinn Property Consultancy is a premier real estate service in Estonia, specialising in residential and commercial Tallinn real estate, with a strong focus on consultancy services for overseas property investors in Estonia. Our recent media accolades include mentions in both the UK quality newspaper the Daily Telegraph, and the New York Times.

*Revenues from sales increased by fourteen per cent at current prices y-o-y to June 2012, and by two per cent month-on-month, the report stated.

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Estonia’s Credit Rating Affirmed At A1 By Moody’s

Bond credit raters Moody’s Investor Services have affirmed Estonia’s A1 government bond rating and stable outlook.

As reported on this blog, Fitch had already upped Estonia’s rating to A+, so this is more good news.

The rating was based on factors including the Estonian government’s budgetary rigour and financial strength during the continuing crises of the 2008-10 downturn and the Eurozone (Estonia joined the Euro in January 2011) the low level of public debt, healthy banks and Estonia’s ability to withstand external shocks.

The rating could change over time of course, with both up- and downgrades possible. If Estonia had a long-term track record of steady growth (GDP has of course been growing since the downturn) and a strengthening and diversification of its economic base (recovery has largely been export driven) an upgrade might be on the cards, according to Moody’s.

Conversely, if an intensification of the Eurozone crisis had a negative impact on the public debt situation, or if foreign bank owners (the bulk of the successful banks in Estonia are Scandinavian owned) wavered on their commitments, which could have a similar effect, a downgrade could result.

In Any event, A1 it is! More information from Moody’s is here.

 

The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Estonia Vs Slovenia

An item first published on this blog on 6th July, 2012.

An interesting and detailed post here, from the redoubtable Edward Hugh, about one of the two other CEE countries, apart from Estonia, that have acceded to the Eurozone, namely Slovenia (the third country is Slovakia).

Having consistently outperformed Estonia and even ‘older’ Eurozone countries like Portugal, it seems not all is well with Slovenia.

Like Estonia, a small country (with a population of around 2 million) which was formerly a part of Yugoslavia and in fact the first constituent state to gain independence in 1991, Slovenia now seems to be drifting towards joining Spain, Greece, Ireland et al in an IMF or similar bailout, according to the article.

Moreover, in some areas where Estonia has seen an improvement over the last year or so, for example in GDP levels and construction volumes, Slovenia has seen a decline. Unemployment, whilst at a somewhat lower rate than Estonia’s (over eight per cent in Slovenia as compared with a little over 11 per cent in Estonia) has been consistently growing in Slovenia since 2008, whereas the trend in Estonia has been for a fall since mid-2010 (though with small recent increases).

Furthermore, Estonia has leapfrogged Slovenia in the credit ratings stakes, at least as Fitch sees it. As reported on this blog, Estonia currently holds a Fitch rating of A+ whereas Slovenia is now rated at A.

Goodson & Red Tallinn Property Consultancy is a premier residential and commercial property service based in Tallinn, Estonia, with a strong focus on consultancy services for overseas property investors. Our recent media accolades include mentions in both the UK quality newspaper the Daily Telegraph, and the New York Times.

 

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Increase In Number Of Houses On The Property Market In Estonia

According to Tõnu Toompark on his adaur blog, although the kv.ee index* of property prices in Estonia has seen only scant changes over the past year (a 0.98 per cent y-o-y fall to June 2012) this does not tell the whole story as regards the market here.

For one thing, the index has been fairly stable over the past couple of years (the index is based on asking prices rather than transaction prices**) which means that vendors have not had unrealistic expectations. On the other hand, transaction prices (which are naturally lower than asking prices) have at least in some areas been creeping up towards the levels of asking prices, which has led to a quite active property market over the last few quarters, writes Tõnu.

One area where the statistics bear this out is in the number of houses which have appeared on the market recently – 409 in the year to June 2012. Now, 409 may not sound like a lot of items, but it is worth taking a look at the number of houses on the market at any one time. At the time of writing (13.00 on 25th July) there were, on the kv.ee portal itself, 14 516 apartments for sale in the whole of Estonia (5 646 in Tallinn) as against 8 000 houses (621 in Tallinn). In other words the property market in Estonia, and in Tallinn in particular, is dominated by apartments. The city24.ee portal paints a similar picture, with 14 115 apartments for sale across Estonia versus 6 101 houses.

It needs to be pointed out here that the two portals’ statistics are likely to represent a figure for items on the market which is higher than the actual figure (due in part to the same property being listed by multiple agents and so counted more than once, or ‘dead’ properties which have been listed for several years); nonetheless Tõnu cites 5 654 houses being on the market in Estonia in June 2012.

This increase in supply of houses on the market has not been uniform throughout the country, although in all but two counties (Maakond) in Estonia, there have been increases, some of them substantial. For example in the county of Läänemaa there was a 58 per cent increase in numbers of houses on the market, according to Tõnu’s data.

The two exceptions were Viljandimaa which saw a -24 per cent fall in supply, and Lääne-Virumaa which saw a -6 per cent fall (there are 15 counties in Estonia).

In addition to that, no data was available for changes in supply of houses in Põlvamaa (though only 15 houses were listed as for sale in June 2012 here).

The figure for Estonia as a whole was an increase of 8 per cent in the supply of houses on the market (409 items as noted).

As regards prices of houses, changes were more variable. As might be expected from microeconomic theory, an increase in supply led to a fall in asking prices in a lot of counties (as much as -27 per cent in Järvamaa in central Estonia). However five counties actually saw an increase in asking prices, including the key counties of   Tartumaa, Harjumaa (where Tallinn is located) and Pärnumaa (increases of six, two and one per cent respectively). Reasons for this are largely speculative, although it is worth noting that when taken as a whole, Estonia saw no change in asking prices.

In summary: both asking prices and transaction prices remaining pretty static in the market for houses in Estonia, but there is an increasing availability of houses to buy nonetheless.

The original article by Tõnu Toompark (in Estonian) is here.

*The KV.ee index, which commenced on 18th 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 7th 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 5th September and 27th October, 2010.

**Please see our recent article on the translation of the Estonian words ‘pakkumine’ and ‘pakkumushind’.

 

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Statistics: Residential Space In Estonia Has Increased 0.4 Per Cent Y-o-Y

Citing figures from the Estonain statistics office, Tõnu Toompark has reported on his Adaur blog that the total number of newly constructed residential units compared with the existing housing stock has increased by 0.4 per cent y-o-y, to 2012. The actual area of residential space versus existing stock increased by 0.68 per cent over the same period.

These may not seem like huge figures, but we are talking about increases as compared with the existing stock of course; the figures for the ‘boom’ years were much higher, with an approximately 1.1 per cent increase in numbers of units compared with stock in the peak year of 2007 (and over 1.4 per cent when measuring new developments by area) and at no point during the slump did the figures actually move into negative numbers.

That said, a one per cent increase in new housing over existing stock is required to account for depreciation in that existing housing, according to Tõnu. The magic one per cent figure will allow the maintaining of the quality of housing, or indeed an improvement through refurbishments and renovation work, Tõnu explains.

However, at best, there are only three years so far where that has happened, at least when going on area of residential stock (rather than numbers of units) namely 2007 as we have noted, and the two years either side of that. Thus in general there has been a deterioration in the overall quality of the housing stock over the last few years, when applying this rule, Tõnu notes.

That said, the situation is markedly better than was the case prior to the boom; 10 years ago in 2002 the number of new units compared with housing stock had only risen by 0.18 per cent y-o-y and the figure for area of new residential space had only increased by 0.3 per cent on the existing stock, writes Tõnu.

The original article (in Estonian) is here including a graph of y-o-y figures for ratio of new residential developments (by number and by area) to total stock.

It will be interesting to see if the mini-boom in construction which is taking place at present, and likely to be accompanied with a growth in commercial construction due to a dearth in good office space, will contribute to pushing the ratio of new housing to existing stock closer to the desired one per cent mark.

Goodson & Red Tallinn Property Consultancy is a premier real estate service in Estonia, specialising in residential and commercial Tallinn real estate, with a strong focus on consultancy services for overseas property investors in Estonia. Our recent media accolades include mentions in both the UK quality newspaper the Daily Telegraph, and the New York Times.

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