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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Ten Top Tips When Buying Residential Property In Tallinn And Estonia

In amongst all the up-to-date news and developments about the real estate market, and everything else in Tallinn and Estonia, we like to provide concrete advice to those who are thinking of buying in Tallinn. After all, property is our passion so we ought to give vent to that now and again!

To that end, here’s some advice on buying here, which we’ll provide free, ‘cos we’re like that. We might even cover the dos and don’ts of letting out property here soon as well so watch this space. Even if you have already invested here, you will find some useful tips to help you navigate the small but thriving real estate market here.

We have taken the perspective of a potential overseas investment buyer in Estonia (i.e. buy-to-let) but the following is largely also applicable to those who are thinking of buying a part-time (such as holiday home or pied à terre in Tallinn) or indeed full-time dwelling in Estonia.

Please note that this post is for information only and should not be taken as legal or financial advice. Please contact a legal or financial professional for that! (We can help get you in touch). This information is provided free of charge and, whilst we strive for accuracy in all things, Tallinn Property and Goodson & Red accepts no responsibility for any loss or other misfortune arising after acting upon this advice.

That said, we are confident that the information provides an accurate consumer-eye picture of the residential real estate climate in Tallinn and strongly advise you to bear it in mind, especially since there is unlikely to be any similar information avaiable in English, so read on..

1) Find a reliable partner who will protect the buyer’s (i.e. your!) interests. The best indicator is a good friend, acquaintance, a positive experience or a recommendation from someone in the know here. If you are not sure then visit at least a couple of estate agents/brokers to get a better idea of different work cultures and strengths.

Some of the agents here in Tallinn are large and well established, including Uusmaa and 1Partner, which have a large volume of items, a big staff, offer a range of services and have plenty of knowhow (Uusmaa was founded in 1993 not long after Estonia became independent, and is nationwide). 

Some other bigger agencies in Estonia to think about include Pindi-Eri, Arco Vara, DTZ (which is not so strong in Tallinn) and Domus.

Bigger is not necessarily better of course, and there are a plethora of smaller and middle-sized agents in Tallinn and Estonia in general (at least 300 across the country). The range and quality of services will vary, however, and it is important to understand that the estate agent sector is not so heavily regulated as it is in, say, the UK. Some agents, particularly the bigger ones, are heavily sales-driven; the very small outfits may simply be an individual registered as a company to market a couple of properties belonging to themselves or friends and relatives. In general not all agents are experts in dealing with overseas investors and focus more on the domestic market so it is important to establish their credentials here too.

2) Unless you speak Estonian it is naturally important to find an agency conversant in a language which you understand. Most of the bigger agents, indeed most professional-aged people, will speak English, and most agents will speak Russian too. It’s not hard to find Finnish speakers here either, and not unheard of for agencies who have staff conversant in German, Swedish, Spanish or Italian either.

Most of the bigger agencies will have websites in two to three of these languages (usually English is one of them, although not all of the material in Estonian is necessarily translated) and often each individual agent will list the languages he/she can speak.

3) Be sure of the current market situation. The market is relatively transparent compared with some other areas of the CEE zone; one useful source is the two big real estate portals here, www.kv.ee and www.city24.com. These hold most of the properties that are on the market in Estonia (city24 also covers Poland, Sweden, Finland, Lithuania and Latvia) are searchable (in English) by region of Estonia, district (in the case of Tallinn) number of rooms, size, price and many other variables. Listings usually come with multiple, good quality photos although you should of course visit a property in person before buying; the agent who is acting for the property will be listed. Of course some properties will be listed with multiple agents.

Please note that just because a property is listed on kv.ee or city24.ee it doesn’t mean that the asking price is necessarily going to be reasonable, and be sure to look at the date the advert commenced. If a property has been up for more than a few months it is likely there are some issues either with price or something else. At the time of writing the average price per square metre for property in Tallin was a little over 1 000 Euros/square metre, rising to around 1 800 Euros/Square metre in central Tallinn (usually somewhat more than that in the Old Town itself, with Toompea being generally the most prestigious part of the already-prestigious Old Town) and the sought-after residential district of Pirita.

The figure for the whole of Estonia was 700 Euros/Square metre at the time of writing although there are naturally regional variations, with Tartu and the resort town of Pärnu, for example, being more expensive than the towns in the eastern-most parts of the country.

A bewildering array of statistics is published every month by one of the big hitters, Pindi-Eri, although the catch is it’s all in Estonian. This includes figures for average prices, sizes, number of owners etc. for all areas of Estonia going back many years (transparency, remember!). Some more comprehensive information is available on real estate expert Tõnu Toompark’s adaur blog (again usually in Estonian) together with Goodson & Red’s quarterly Market Review (and this IS available in English!) plus of course this blog.

4) When you have found an agent, obtain from this real estate partner an accurate picture of the service they provide and the fees they charge buyers for their services. It is normal for buyer’s agents to charge something. This shouldn’t be much more than a two to three per cent commission, or a fixed fee plus commission, or purely a fixed fee, but it varies by agent and also type of property.

It would often work in the buyer’s advantage to go for a fixed fee, since with a commission, it is not in the agent’s interest to get a lower price since they would be losing out on commission in so doing. At the same time this fixed fee might be split between an initial sum and a ‘bonus’ sum payable on completion of sale. A ballpark figure fixed fee would be a around 1 000 to 2 000 Euros for the initial fee. The bonus will often be pegged to the value of the property and could be anything from around 500 Euros for a small property to 3 000 or so for a high end property. In any case the fixed fee should equate to a commission of around two to three per cent, without the disincentive noted above.

Beware of agents who promote a ‘discount’ on their fixed fee or commission if the selling price is reduced by a certain amount from the asking; this could encourage the buying agent to collude with the seller to set the initial asking price higher than it is worth to give the impression of obtaining a good price. Thankfully such practices in Tallinn are now the exception rather than the norm and not something which larger, reputable agents would be likely to fall into, but as an overseas national it is important to exercise due care and obtain the advice and assistance of a local acquaintance where possible, even simply for language issues. On the plus side, Estonians are quite flexible, if you see a property you like but the buyer’s fee structure doesn’t quite work for you, always speak up and ask how this can be negotiated.

5) Become acquainted with all factors relating to the buying process. These include notarized contract forms, state orders of magnitude, notary fees etc. In general this is quite a straightforward affair in comparison with the UK for example, and it is not necessary to hire a lawyer or obtain a full survey unless you wish to.          

Ask the partner to identify local laws related to real estate acquisition / possession / management. Depending on where you are from, there may be restrictions to buying property (if you are an EU citizen for example, there are not). Also be sure to check whether your country of origin has a double taxation agreement with Estonia; if it does not, you are not liable for taxation on rental income in your own country.

In general if you on the ground in Tallinn or Estonia it is possible to view a property in person in exactly the same way you would do in the UK or US, though you can usually (not always) expect a refreshing lack of hard-sell or ‘estate agent-ese’ in comparison. Making an offer can be done verbally although this does not make it legally binding; the seller might come back with a counter offer, although note that some sellers have little leeway in the negotiation process (due to many people borrowing during the boom time at a large loan to value rate at higher price levels than today). Naturally you should have an idea based on point 3) above plus your own reasearch as to whether you are getting a good deal even at the asking price, and there are some bargains around.*

6) Explore all options for finance. If you are able to borrow from Estonian banks (for instance an EU citizen should be able to) it is worth investigating because they are offering low rates even by present-day standards (as low as three per cent). The real estate portals kv.ee and city24.ee noted in point 3) above carry mortgage calculators which can give the monthly payments due on a property. Banks are much more stringent in their terms than the boom period of course, and 100 per cent loan to value mortgages are a thing of the past, though that is likely to be the case everywhere. In any case the mortgage application process in Estonia is quite straighforward and decisions are usually made quite quickly. If you are based in another country it may be possible to use your income there to determine how much you can borrow; with Estonian real wages still comparatively low by EU standards you may find you can borrow much more than a local Estonian could, however it is a good idea to exercise restraint and not overstretch yourself.    

7) When considering buying an investment property, do think about the type of property you are investing in. Is it likely to be suitable for a student, foreign national or young professional(s)? How old is the building? What are communal areas like? Are there likely to be any planning permission issues? Is there much storage? Is there a parking space? A garden? What are the communal charges? Is it located near to public transport links, retail outlets and other facilities? Again, your agent will be able to advise you on this.

8) Location, location, location. Something of a cliché but true nevertheless. Experience shows that the best chance of investing in a successful rental property falls within the central part of Tallinn. This incorporates the old town, the ‘Kesklinn’ (city centre) and to a certain extent the areas of Kadriorg and Kristiine, to the east and west of the centre respectively, so you should really confine your search to these areas of Tallinn. Also worth considering are areas which are “up and coming”, most notably the waterfront from the harbour westward to the Kalamaja district, fast becoming the bohemian quarter of Tallinn with restaurants, cafes as well as residential developments sprining up, and still within walking distance of the centre; your broker will be able to advise you on the current landscape.

We are not saying that properties outside this zone are necessarily going to be untenable, but the distant location together with type of property (which tends to veer between either Soviet era apartment blocks or older wooden houses which would tend to suit local families, to larger, detached houses with large gardens which would be difficult to let out and manage) make it unlikely. Outside of Tallinn the scope is somewhat more limited for investment property, but your agent will be able to advise you nevertheless.

9) When buying a newly-refurbished apartment, do not assume that the kitchen, and even the bathroom, will be fully installed. Often you will have to by the fittings separately and get them installed, so be clear as to what is and is not included in the price and the time-frame within which the property will be ready for habitation.

10) When employing the services of workmen be sure to get recommendations from your agent or other contacts that you may have in the country. Self-explanatory really, but please note that due to economic factors many of the country’s best construction workers, craftsmen, carpenters, plumbers etc. are out of the country at any given time, sometimes only on a temporary basis but often (particularly in Finland) semi-permanently at least. For this reason it is crucial you get recommendations. On the other hand don’t let this put you off any property which you see as having potential but which needs work; part of Estonia’s economic recovery at the time of writing lies in a mini-construction boom, with rising prices in construction materials ensuring that there are people willing and able to work in this field.

 

*Please note that the above info does not include the case of foreclosed properties, which are generally in the possession of the banks and are often being auctioned off. Having said that much of the excess here has already been taken up and it is difficult to find bargains today, not to mention the fact that there might be issues regarding existing tenants or former owners still inhabiting the dwelling. For this reason we do not recommend inexperienced investors in this region intentionally pursuing this route.

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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Estonian Finance Ministry Building In Tallinn To Be Demolished, Rebuilt

According to a report by Ott Tammik on the English language site of the Estonian Public Broadcasters (ERR) the building which houses the Estonian Finance Ministry is to be demolished and two new, identical towers are to be built in its stead.

The current building at Suur-Ameerika 1, which was constructed back in 1977 when Estonia was a constitutent republic of the former USSR, has been declared unfit for renovation (which was the original intention) according to the report.

The work is due to start some time in 2013 and whilst the new buildings, which will also house the Ministry of The Economy, the Ministry of the Interior and the Ministry of Social Affairs from 2016, are to resemble the existing building externally, the interior will comprise modern, open plan offices rather than separate office rooms as is currently the case, according to the report.

This has not been met with unified approval, it would seem. The Estonian Architect’s Union called the building an architecturally valuable monument to its era and the decision to demolish it ‘strange’, the report stated.

Possible interim accomodation for the Finance Ministry during the period of construction could be the current Tax and Customs’ Board (EMTA) offices in various locations around Tallinn. EMTA is due to relocate to new premises in Ülemiste in the second half 2013.

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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Statistics: Volume Of Residential Space In Tallinn Has Increased 0.29 Per Cent Y-o-Y

The volume of residential space in Estonia, according to data from the Estonian Statistics Office, stood at 657 800 items with a total area of 40.53 million square metres, as reported by Tõnu Toompark on his adaur blog.

This represents an increase in the number of residential items of 0.29 per cent y-o-y, and an increase in area of residential space of 0.52 per cent, writes Tõnu.

A typical residential property according to the data will be around 30.3 square metres in area; 10 years ago it stood at 27.5 square metres, Tõnu continues.

There are currently 491 residential units per 1 000 people in Estonia, or 2.04 people per unit. In 2002 that figure stood at 457 units per 1 000 people or 2.19 people per unit, Tõnu continues.

The original article (in Estonian) with diagrams showing changes in numbers of residential units and total living space area, plus changes in average living space area and number of residential units per 1 000 inhabitants, is available here.

 

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Demand For Office Space Outstripping Supply In Tallinn, Estonia

Demand for good quality (A class plus) in Tallinn is currently outstripping supply, according to a report on the Estonian Press Digest from News2Biz.

Whilst the period from late 2010 well into 2011 saw an upsurge in construction, including office space, rising construction costs have since dampened down this phenomenon, the report stated.

Quoting sources at Uusmaa real estate firm, the report went on to explain that whilst many of the developments during the more frenetic period of construction were of good quality and in prime locations in the centre of Tallinn, since then the lack of modern, high class office space has become ‘acute’.

 

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“Why You Should Be Investing In Tallinn Real Estate – Your Essential Guide to the Tallinn Property Market”: Available Soon!

We haven’t forgotten about our promise to launch the new Guide “”Why You Should Be Investing In Tallinn Real Estate – Your Essential Guide to the Tallinn Property Market”: Available Soon!”.

Our team are putting the finishing touches to the publication and it will be out very soon so watch this space!.

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 Of 409 In Supply Of Houses In Estonia Y-o-Y

According to a post by Tõnu Toompark on his adaur blog, the supply of houses on the real estate market in Estonia has increased by 409 y-o-y.

The Estonian real estate market in general, including Tallinn, is overwhelmingly apartment driven. For example as of 17.00 on 23rd July, 2012 there were 14 014 apartments listed in real estate portal kv.ee as being on sale in Estonia, as compared with 7 645 houses (these figures do not take into account items which are listed by multiple agents however, so the real figure is likely to be somewhat lower – see below for an accurate figure for number of houses on the market in June 2012).

Figures for rentals paint an even greater disparity, with a mere 57 houses for rent listed on kv.ee for the whole of Estonia as compared with 1 598 apartments.

Moreover the kv.ee index* has fallen by 0.66 month on month to 60.7, a y-o-y fall of 0.98 per cent, writes Tõnu.

Tõnu goes on to point out that substantial changes in the index are rare, as has been witnessed over the last couple of years, the result being that sellers (vendors) are not seeing their expectations raised so far as asking prices** are concerned.

That said, there have been increases in transaction prices, which has led to a somewhat active market over the last few quarters, Tõnu goes on.

Turning to house (as opposed to apartment) prices specifically, Tõnu notes that asking prices as a whole in Estonia have remained at the level they were a year ago. In the key counties (Maakond) of Harjumaa (where Tallinn is located) Tartumaa and Pärnumaa, there have been increases in asking prices of two, six and one per cent respectively.

On the other hand, eight counties have seen a decrease in asking prices, Tõnu continues.

In any case the supply of houses on the market has increased in all but two counties (Viljandimaa and Lääne-Virumaa which have seen a 24 per cent and six per cent fall respectively).

As a result the number of houses on the market throughout Estonia increased by 409, or eight per cent, y-o-y to June 2012, when kv.ee listed 5 654 houses for sale.

The original article (in Estonian) including figures for number of houses on the market and asking prices, plus y-o-y changes, for each of the  15 counties in Estonia, is here (incidentally there doesn’t appear to be a strong correlation between changes in supply of houses on the market and changes in asking price; in other words areas where there have been increases in the volume of houses on the market haven’t necessarily seen a reduction in asking prices and vice versa, though in some areas they have; other factors seem to be at play in determining prices as well as classical supply and demand).

*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: Construction Volume Index In Estonia Grows 28 Per Cent Y-o-Y

Following yesterday’s post revealing the minimal increase in apartment prices in Estonia over the past 12 months, another post on Tõnu Toompark’s Adaur blog has stated that, in contrast, construction volume has seen a 28 per cent rise y-o-y to Q1 2012.

This figure is derived from the construction volume index compiled from the Estonian statistics office data, which currently stands at 84 points, writes Tõnu.

This represents a return to the average level for 2009, Tõnu says.

In the meantime there had been a growth in construction volume index over the last five quarters, at figures of around 30-40 per cent.

For the full report (in Estonian) see here, including graphs showing figures for the building index both in Estonia and globally, going back to 2001 (though this is retrospective; the index is calibrated at 100= the year 2005), together with graphs showing y-o-y changes over the same period (where the ‘year’= 100, so the figure for Q1 2012 will be 128).

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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Apartment Prices Showing Slight Y-o-Y Rise in Tallinn, Estonia

Most of the major newspapers in Tallinn are taking a break today after Jaanipäev but here at Tallinn Property we don’t want to take a break from bringing you up to speed on all that is happening in real estate in Tallinn and Estonia in general!

According to a report on Tõnu Toompark’s adaur blog, signs of very slight price increases in property prices in Tallinn and Estonia as a whole can be gleaned from the latest kv.ee index. The kv.ee index currently stands at 61 points which is all of a 0.5 per cent y-o-y increase. Offer prices statistics for both Tallinn and some of the provincial towns show more concrete evidence of modest increases.

Meanwhile the volume of apartment offers remains at about the same level it was a year ago, though in Tallinn the level is about one per cent lower with 8 700 apartments currently under offer, writes Tõnu.  Average offer prices for the whole of Tallinn (apartments) currently stands at 1 317 Euros/square metre.

That said, agents have shown some optimisim in reporting a slight rise in offer prices on Tallinn flats, Tõnu continues. At the same time it needs to be pointed out that offer price rises remain below the growth in actual deal prices. Whereas the offer price on Tallinn apartments has seen a five per cent rise y-o-y, actual deal prices have seen a seven per cent rise over the same period, Tõnu says.

According to the data, within Tallinn, the district to have seen the highest rise in offer prices is Kristiine with an eight per cent increase from 9 May, 2011 to 9 May, 2012 (average price of 1 316 Euros/square metre). The Old Town actually saw a decrease of one per cent in offer prices over the same period (average price of 2 792 Euros/square metre). The greatest increase in volume of offers over the same period was in North Tallinn with an increase of 13 per cent (to 1 418 offers) though many areas saw a fall y-o-y, as high as -18 per cent in Pirita (278 offers). Outside of Tallinn, Tartu has also seen a fall in the volume of offers (-22 per cent) whilst simultaneously experiencing an increase in offer prices of eight per cent (average of 1 051 Euros/square metre).

Estonia as a whole has seen only small increases in both number of apartment offers at two per cent (18 511 currently) and an increase in average offer prices of three per cent (1 004 Euros/square metre).

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

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.

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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Statistics: Number Of Residential Occupancy Permissions In Estonia Healthy, But Declining

The beginning of 2012 has demonstrated a successful rate of issue of residential permits, according to Tõnu Toompark on his adaur blog. The first quarter of 2012 saw 707 permits being issued, which was a rise of as much as 86 per cent y-o-y, Tõnu goes on.

Nevertheless caution should be of the essence, Tõnu explains, and no real estate or construction boom should be inferred from these figures. In fact, these permissions often have their roots dating back to the beginning of 2011 when several new developments were commenced which are only now being finished, writes Tõnu.

Taking this fact into account, the number of residential permits has in real terms in fact been declining, and new projects over the last two to three quarters have only been added to at a very slow rate.

Thus we can conclude that the number of completed dwellings will start to contract after a couple of months.

For the original article (in Estonian) together with graphs plotting changes in volume of new residential living space and permissions thereof, over the last ten years or so, visit Tõnu Toompark’s adaur blog.

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