Statistics: There are 159,411 residential mortgage loans in Estonia

The average residential mortgage loan in Estonia fell to €36,802 in Q3 2013. However, the changes are not significant – the loan balance a year ago was just 1% bigger than today.

The average loan amount is decreasing mainly as a result of new residential mortgage loans. The total number of residential mortgage loans just a year ago was 157,600, but the relevant indicator at the end of Q3 2013 was 159,400. This shows an increase of 1.2%.

The main factor behind the increase in the number of residential mortgage loans is the interest rate, which has remained very low for a year now. The increase in average wages has supported the good impact of the low interest rate.

The fear of missing out on the price increase shared by home owners is also something that must be mentioned. The hope that the fast increase in apartment prices seen last year will also continue in the coming years is an increasingly more frequent reason for buying a home.

Balance and number of residential mortgage loans in Estonia under repayment

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Statistics: Mortgage Interest Rate in Estonia at a Record Low

According to Tõnu Toompark’s Estonian property Adaur blog, morgage rates in Estonia have fallen to a level of 3.15 per cent at the end of the first quarter of 2012. The only other time when such a low level of domestic rates was reached was back in 2005, writes Tõnu

And whilst interest rate margins have steadily grown over the last year, the falling Euribor rate of European banks’ lending rates has contributed to the overall decline in Estonian banks’ interest rates.

The current prognosis would have it that a low Euribor looks in the offing, and as a result, continuing low interest rates, writes Tõnu.

Meanwhile loans to businesses stood at a rate of 4.17 per cent at the end of the first quarter of 2012, Tõnu goes on.

This is a translation for Tallinn Property and Goodson & Red Estonian property consultancy, and the original article (in Estonian) is available on Tõnu Toompark’s Estonian property Adaur blog here, complete with detailed graphs going back to 1998 and showing changes in Euribor rates, as well as interest rates within Estonia in Kroons and Euros (and also Deutschmarks since the Estonian Kroon was initially pegged to the German Mark after its inception in 1992) as well as the margin, i.e. the difference between the Euribor rate and the Estonian banks’ own interest rate.

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Canadian Real Estate Company Enters the Estonian Market

SNC-Lavalin Homburg Property Management, a company owned by two Canadian capital holding companies, has opened an office in Tallinn. Similar ventures are also being opened in Riga and Vilnius.

The company was founded by one of the biggest engineering, construction management and maintenance companies in the world, SNC-Lavalin Group Inc., with more than 100 years’ worth of experience together with the Baltic management and maintenance company Homburg Valda, which belongs to the Homburg group of companies. SNC-Lavalin Group has been developing and operating in the real estate field in Canada, the USA and the Netherlands for more than 40 years already.

According to SNC-Lavalin Homburg Property Management director Algirdas Augustaitis, incentives for the establishment of the joint venture included the existing work experience enjoyed by Homburg Group in the Baltic States, along with market development potential, especially in the field of public-private partnerships.

“Shortage of capital at the creation or improvment of infrastructures are problems not only in developing countries and not only in economically tight times. Public-private partnerships are very common in Canada, and bringing our long-term experience to Estonia should only be beneficial in the long term” said company director Algirdas Augustaitis.

In Algirdas’ opnion, SNC-Lavalin’s team was able to attract the largest possible level of capital even as the market is trying to overcome the most difficult circumstances as it is. For instance in 2010 the McGill group of university health centre clinics was backed with a 732 million US Dollar (approximately 573.6 million Euros at the time of writing) investment, which is currently the largest sum in the history of public-private partnerships in Canada.

With public and private partnerships undertaken in the performance of specific infrastructure projects such as railways, airports, bridges, hospitals and prisons, the parent company is planning to consolidate firms’ human resources.

In terms of offering its services to business enterprises operating in Estonia, SNC-Lavalin Homburg Property Management focuses its activities mainly towards retail, office and logistics centres. The new company’s director stated that the main competitive advantage it offers is a better relationship between price and quality than potential customers are currently offered in the market.

The company opened its Tallinn office on January 17th. The original article (in Estonian) can be viewed here.

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Tallinn Real Estate Market Report Third Quarter 2011

We have just been putting the finishing touches to a fresh copy of our quarterly review of the Tallinn property market and the review.

Our latest Tallinn Property and Rental Market Quarterly Review covers all developments in the third quarter of 2011, and as always the review contains a brief look at the Tallinn residential market:

  • situation regarding mortgage loans, consumer security
  • information on average asking and transactional prices
  • current state of the central Tallinn rental market
  • invaluable sample transactions
  • advice on rental business considerations

Get the Tallinn Property Market Review 2011 Q3

We would also very much like to hear your views re the property market. Or if you have any suggestions regarding topics. Please do not hesitate to write or tweet us, or leave us a comment below or on our Tallinn Property Facebook page.

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Statistics: The Ratio Of New To Existing Housing Stock

Estonian Statistics Office data for 2010 has demonstrated that some 2324 units consituted new living space, which in total represents an increase of some 0.36 per cent in the amount of housing stock. This translated to an increase in total area of housing stock of 0.59 per cent for the same year, according to Tõnu Toompark on his adaur blog.

Over the last five years as a whole the yearly average increase in stock as a result of new units stood at 0.44 per cent, and in terms of area, new housing added an average of 0.62 per cent to the total each year.

In order for the quality of housing stock to continue to be maintained, the life expectancy of the stock of living space must be in the range of 16-226 years – either in terms of new units of dwelling space or of total area. When this happens the total stock will neither increase or decrease, writes Tõnu.

Unfortunately today the average life expectancy of a dwelling is 70 years, he says.

It can therefore be concluded that in order to ensure the maintenance of housing stock levels, it is necessary to make significant additions. Otherwise, depreciation will cause the overall housing stock level to deteriorate over time.

It should be noted that this does not take into account the fact that the life expectancy of housing stock can also be prolonged through renovation and repairs.

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

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Statistics: No Change In Loans Interest Rates

Euro-based home loans rates have remained unchanged in the range of 3.2 to 3.4 per cent, despite small rises in the Euribor index of European lending rates since 2009, according to Tõnu Toompark on his adaur.ee blog. The monthly rate stood at 3.4 per cent for March, whilst the Euribor index over the same period was 1.5 per cent, writes Tõnu.

These small but persistent rises in the Euribor rate, when combined with falling lending rates by the banks themselves, mean that banks’ margins have been eroded somewhat.

Meanwhile the average interest rate for business loans stood at 4.47 per cent in March, Tõnu explains.

The original article (in Estonian) along with diagrams illustrating the chages in Home loan rates in both Estonian Kroons and Euros, and margins, is 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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