Statistics: For an average apartment in Harju County, 7.4 years’ mean wages have to be paid

In an Estonian average, 5.7 years’ mean net wages have to be paid on a transaction with an apartment. In Harju County, wages are higher; however, real estate there is also the most expensive. As a result, far more – 7.4 years’ wages – has to be paid on an average transaction with an apartment in the capital and its vicinity.

On an average transaction with an apartment, sellers of real estate charge 5.8 years’ wages in Tartu County and 4.1 years’ wages in Pärnu County. (more…)

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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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Where To Buy In Tallinn, Estonia?

First published on this blog on July 21, 2012.

People often ask us what the up and coming areas in Tallinn are. What’s going to be the next hot spot to buy an investment property with a potential for strong growth and consistent cashflow from rentals?

We don’t have a crystal ball of course – and nobody does, not one that is effective anyway – but based on the empirical evidence of what has been happening in the couple of years of recovery since the slump we can make a sensible forecast.

City Centre and Old Town

First, the Old Town (see map 2 below) will continue to hold its value. It is a UNESCO world heritage site, hugely popular with tourists, well supplied with a variety of good quality restaurants, cafes, bars, craft shops, high end clothes shops and other amenities, and is close to the harbour not to mention the seat of Governmental power. What’s more people actually live and work there.

The ‘Kesklinn’ (City Centre, also called the ‘Südalinn’) similarly will retain its prominence and, whilst prices took a greater bashing here during the 2008-2010 slump than in the Old Town, is of key significance, containing as it does not only Tallinn’s Central Business District, but more entertainment outlets, foreign embassies and a large number of residents.

Add to that the district of Kadriorg, to the east of the Kesklinn, with its leafy, evocative streets, fine old housing, and the Palace built for Catherine the Great, not to mention the President’s residence, and you already have a large, contiguous area of desirable housing with strong rental potential. In fact, the three areas noted above come under the one administrative area as far south as the Ülemiste Järv (see map 2) which is the Tallinn city lake, and cover 28 square kilometres in total.

But these areas have already arrived, so to speak. Whilst developments in the Kesklinn in particular look set to continue, such as the new Finance Ministry as reported in a previous post, and there is plenty of scope for refurbishment work in all areas, it seems unlikely that there is to be any radical transformation here. That process has already happened, stretching back the 20 years since Estonia’s independence.

Emerging Districts

Now to the districts of Tallinn showing promising signs for investors. Again, these are largely adjacent to one another and can thus be treated as a single entity for our purposes. Essentially they comprise the ‘Sadam’ harbour area (see map 1 below) stretching westward along the waterfront along the ‘Culture Kilometre’ (a popular cycling and jogging route) to Kalamaja. This stretch is set for a lot of exciting development in the coming years, both residential (that process has already started with the quality new housing in the Jahu and Suur-/Väike-Paterei streets) and commercial. One recent development which has already happened is the newly refurbished Seaplane Harbour, which includes dry docks, Seaplane Hangars dating back to the late Tsarist time which hold a museum, and vessels of historical interest.

Kalamaja itself is similarly already experiencing a renaissance. It largely comprises character wooden houses, mostly around a century old but here have been some tasteful new builds constructed along the same lines, as well as new, more modern builds. The Kalamaja effect is spreading southwards to neighbouring Pelgulinn, which has similar housing stock and is quiet and family friendly, yet still a stone’s throw from the Old Town, eventually dovetailing into the borders of the more-established Kristiine suburb. The Kassisaba district (close to the British embassy) has seen construction and refurbishment activity aplenty recently as well (e.g. at Adamsoni 33).

Returning to Kalamaja, the border that separates it from Pelgulinn, demarcated by the goods rail line to Kopli, host what is really the hub of this new revival – the so called bohemian quarter. This comprises three of the hippest restaurants in town, Kukeke, run by the same people who are behind the successful Komeet restaurant in the Solaris centre, F-Hoone (literally ‘building F’) which are both in former light industrial buildings, and the more established Boheem cafe close to the station.

Other good quality refreshment outlets abound, and we have to mention the nearby Asian Cafe  on Kopli 4c close to the central train station, which offers tasty Indian, Chinese and Thai-style food for those in a hurry and at good prices.

Moreover this area is set to be the new alternative theatreland, with a theatre accomodating a good couple of hundred seats slated for construction next year.

Lastly, this effect may well spread Northwards throughout the Kopli peninsular (see map 1) over the longer term. The Kopli peninsular, once the site of aristocratic hunting forests, today displays very mixed use, with various commercial docks including the Bekker port, the HQ of BLRT, a shipbuilding company, plenty of old wooden workers cottages, office space, parkland and the magnificent Estonian Maritime Academy building. Beyond this at the tip of the peninsular lies the Paljassaare nature reserve, which is excellent for birdwatching and its natural environment in general, all year round.

Rough per square metre price of districts

As regards prices, a rough breakdown for average buying prices of the districts mentioned is as follows:

Old Town: 2 000 – 3 000 Euros/Square metre.

Kesklinn (excluding Old Town), Kadriorg: 1 800 Euros/Square metre.

Kristiine: 1 300 Euros/Square metre.

Kalamaja, Pelgulinn: 1 100 Euros/Square metre.

Kopli: 800 Euros/Square metre.

Naturally these are just ballpark figures at the time of writing and prices will vary with street, type of building, state of refurbishment etc.

As a rule of thumb, rentals will be at least 10 Euros/Square metre in the Old Town (and somewhat more than that for well-appointed properties) falling to around 6 or 7 Euros/Square metre further from the centre.

We hope that this gives a good overview of the state of play with the districts in central Tallinn to watch out for; naturally we welcome your questions, comments and feedback!

 

Maps (click to enlarge).

 

Map 1: Area to Northwest of Central  Tallinn,

including Kalamaja and Kopli peninsular.

 

 

Map 2: Old Town (Vanalinn), City Centre,

Pelgulinn and Kristiine (Lillekülla).

 

 

 

 

 

 

 

 

Map 3: Tallinn City.

 

 

 

 

 

 

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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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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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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Q1 2012: Estonia Sees House Price Increase Y-o-Y Whilst Global Trend Is For Fall

According to property investment portal, Global Property Guide, whilst the global trend for house prices has been for an accelerating downturn as of Q1 2012, Estonia has been bucking that trend somewhat, even seeing something of an increase, at least as regards the y-o-y figure.

The Global Property Guide (GPG) stated that, of the 36 countries for which quarterly statistics are available, only 12 saw a y-o-y rise to Q1 2012. When looking at Q1 statistics compared with Q4 2011, the picture is even more stark, with only 10 counties seeing a rise in prices, and 26 seeing a fall, over that period.

These figures regard inflation-adjusted prices; nominal price statistics paint a rosier picture, with 20 countries seeing a y-o-y rise in prices.

Notable inflation-adjusted y-o-y price drops have been seen in Ireland (-18.9 per cent), Greece (-11.68 per cent), Poland (-10.94 per cent) and Portugal (-10.45 per cent), with Spain seeing a drop of -9 per cent y-o-y in line with that country’s economic woes.

Conversely, according to GPG, Estonia saw a rise in prices y-o-y to Q1 2012, of 9.13 per cent, the highest of any European country. Of the countries polled, only India, or more specifically Delhi at 24.41 per cent, and Brazil (São Paulo) at 18.70 per cent, saw a greater rise over the same period, though it has to be said that these increases were quite substantially higher than Estonia’s.

As regards the quarterly change, growth was much more sluggish as noted, and Estonia actually saw fall of -0.41 per cent as compared with Q1 2011, according to the GPG data.

Other countries to see significant y-o-y growth were Austria (8.24 per cent) Switzerland (5.49 per cent), Norway (5.43 per cent), Russia (3.86 per cent) and Iceland (2.25 per cent). Of these, Austria, Switzerland and Norway didn’t experience a house price slump in the first place, whereas Estonia, Russia and Iceland are seeing recovery.

The full report is available here.

Goodson & Red Tallinn Property Consultancy has more than eight years’ experience in comprehensive property brokerage and consultancy services for investors and sellers, long and short term lettings services and a comprehensive professional management service for landlords, and has recently been cited in UK quality newspaper the Daily Telegraph, and the New York Times.

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Estonian Property Prices Rising Despite Most Countries Seeing A Fall

According to a recent  global property report from prestigious real estate company Knight Frank, whilst the general global trend for house prices is for a continuing  fall, Estonia is bucking this trend and seeing rising prices.

Written by Kate Everett-Allen, the report referred to Knight Frank’s own Global House Price Index (GHPI), where Estonia saw the second highest property price rise in the world y-o-y between December 2010 and December 2011 with a 12.3 per cent GHPI rise (only Brazil was higher) and, whilst more recent rises have been more modest, it is still well ahead of many countries, and much of Europe in particular.

The 6 month GHPI figure stood at 4.4 per cent rise (only Germany was higher at 5 per cent, and Ireland saw a drop of -9 per cent over the same period) and the 3 month period GHPI stood at 1.1 per cent (compared with – 1.1 per cent for the UK).

Whilst the slowdown in China and other Asian countries, not to mention North America, has had its effect on the index, Europe stands as the worst affected region with all 12 bottom spots being occupied by European countries, which makes the Estonian ‘blip’ all the more surprising. In addition to Germany, the only other European countries to have seen an increase are Iceland, Norway and Switzerland; naturally the continuing Eurozone crisis has taken its toll.

60 per cent of countries polled saw a drop in prices over the final quarter of 2011. In addition to the Eurozone crisis and other global economic uncertainty, the report also cited stricter mortgage lending requirements and falling consumer confidence.

“If ..[the] .. trend spreads to more locations, the overall GHPI could easily slip into negative territory during 2012, especially if the slowdown in Asia continues”, the report stated.

Knight Frank is a truly global, high quality commercial and residential real estate agent with a presence in 43 countries worldwide. The original report is available here.

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Smaller Forest Land Interesting To Domestic Investors In Estonia

Whilst the focus of this blog is on Tallinn, we sometimes like to focus on the rest of Estonia, both in terms of residential real estate and in other sectors, or related areas. This article is a translation of an item about the market for forest land in Estonia which first appeared on Tõnu Toompark’s adaur blog.

When considering the market for forest land in Estonia, it soon becomes apparent that the greater part of buyers are domestic investors who undoubtedly view their investments in the short term, but are nonetheless willing to pay more for forest land, since the price of timber has risen when compared with other forms of real estate.

The most pressing question in the forest land market currently is without doubt, is investor interest still increasing?

Uusmaa property consultant Vivika Simmo has answered this question unambiguously: the interest is there again. Investors are once more considereing the prospective growth in forest land.

She points out that the increasing use of timber contributes to the quick sale of forest land by the state’s reserve to those who ae interested. “The greater part of this is from owners who have the advantage of borderland forest land” she said.

Another interesting question is whether there are regional variations. Simmo thinks not, and that this interest is widespread throughout the country. “It is well known that forests in Läänemaa (a county in Northwest Estonia) are of a lower quality, but ultimately everything is price-dependent” she said. “If the forest for sale is offered at a reasonable price, then the interest will follow in every case” she went on.

However, when approached from an investor perspective, then what will the the investor see that will above all make forest land appear attractive? Ms. Simmo identifies three key attributes: good land, strong prospects and the opportunity for expanding the area.

According to the consultant, this is not related to larger investors, but small scale forest owners have seen the forest land sales surge during summer and autumn, when children return to school or free money will be used for other outgoings, but she doesn’t recommend taking out a loan.

Pindi Kinnisvara managing director Peep Sooman was unable to say precisely what the current market trend in forest land was. He did however acknowledge that the market is somewhat in turmoil and that clear indicators of either rising or falling trends were largely absent.

However Mr. Sooman pointed out one important aspect, that buyers will continue to be found amongst both those companies whose goal is within a short space of time to produce the maximum amount of timber and from institutional investors with an interest in larger forest properties and investment horizons stretching to decades; these two differing approaches have been divided betweem elites. Due to the differences in perspectives, investors have very different demands on land in the region and thus the composition of the forest.

Real estate Arco Vara broker Margus Põld pointed out that forest is, next to the food sector, one of the largest in Estonian industry.

There are more than a thousand businesses involved in timber and timber processing in Estonia, employing about 16 000 people.

Mr. Põld has pointed out three trends arising from this which affect the timber industry and consequently the forest land market. First, growth in the European timber market has been directly affected by the global financial crisis. The second phenomenon is that of growing demand for timber from China and Japan, and the third is a growth in demand for wood chippings, which should take place in 2012.

He illustrated this third point by stating that the energy consumption yielded by two million cubic metres of wood chips would require 800 000 cubic metres of timber to produce.

In the light of these factors we can capture the essence of the most important question, according to Mr. Põld, namely, what is investor interest in Estonian forest land and what specifically are they seeking?

It is clear that foresting rights for existing stock are purchased by the domestic market, since overseas investors have virtually no logging rights in Estonia.

Mr Põld emphasised that investor interest is in the long-term perspective and the desire is for forest together with any land purchased. It should be noted, Mr Põld goes on, that larger investor interest starts with land at an area of 600 hectares or more.

Another important fact, according to Mr Põld, is that with forest land purchase investors are primarily interested in fresh inventory, in other words the existence of a forest management plan.

Põld admitted that a local investor buying forest land will do so with a 10 year felling perspective. “Foreign investors tend to invest for the long term and are looking more for fertile forest land with good growth potential”. He pointed out. This brings an interesting situation, where for example a smaller area of land used for forest can provide better value to a local investor than to an overseas one.

It is clear that Estonia is small and that we are affected primarily by world trends, and as a result it could be said that price volatility over the past couple of years has been low.

Mr Põld concluded by pointing out that in comparison with other sectors of real estate, the price of forest land has been rising, which is an important fact for investors.

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

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Estonian Land Board – Seasonal Drop in Real Estate Sales For January

According to analysis of data concerning property prices and transactions from the Estonian Land Board as carried out by real estate firm 1Partner Kinnisvara, whilst January 2012 saw a 40 per cent increase in the number of real estate deals year -on-year, the number actually went down compared with December 2011.

According to 1Partner Kinnisvara managaing director Martin Vahter, as reported on Tõnu Toompark’s Adaur blog, this comes as so great surprise and is most probably seasonal. “The market is being currently shaped by a lot of different factors that are likely to have an impact, for example the exceptionally cold February weather” explains Mr. Vahter.

“At the same time there have been some good signs” Mr. Vahter goes on. “The winter has seen activity from those Finnish people who wish to invest in city centre apartments” he explains, whilst adding that this activity comes from the purchasing power of a market-conscious group of customers.

685 sale-purchase transactions took place in Tallinn in January 2012, which is nearly 25 per cent less than December 2011. The total value of deals fell by 12 per cent over the same period to a value of 49 million Euros.

Apartment price per square metre in January saw no significant variation for the tenth month in a row, where prices have remained above the 1 000 Euro per square metre mark; in this case it stood at 1 036 Euros. The most expensive apartment to be sold in Tallinn cost 350 000 Euros, whilst the cheapest in the city went for 1 500 Euros [editor’s note – such seemingly fantastic bargains are only likely to be found in the outer, Soviet-era dormitory districts, and are most probably affected by other issues].

Twenty one entire residential buildings were built in January 2012, seven less than the previous month. The most expensive deal came to 1.45 million Euros and the cheapest cost 100 000 Euros.

Four unimproved houses were sold in the same month, eight less than in December 2011.

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

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Apartment Deals, Prices In Estonia Picking Up But Caution Still Needed

Summer 2011 apparently experienced a low volume of real estate transactions in Estonia, according to Tõnu Toompark on his adaur blog. However, the months of August and September actually saw a rise to the highest level of the year so far, writes Tõnu. There were 3 428 apartment transactions in the third quarter of 2011.

The increased level of transactions also left its mark on average transaction price and values, which are both rising rapidly, Tõnu continues.

Whereas the number of transactions rose by 5.3 per cent and average prices by 14.1 per cent, the overall value of transactions has risen by 25 per cent.

That being said, given that the global economy has not yet found a solution to its continuing risks, the resulting uncertainty means that it unwise to forget about the potential risks involved.

One upside of the current situation, Tõnu writes, is that caution is held in much higher esteem than would have been the case in the past, despite the steady improvements in the market; noone is suggesting that real estate is a risk-free investment which cannot experience a subsequent fall in prices over time, something that was apparently lost on the market during the boom years of 2005-2007.

As a comparison, the number of deals peaked twice during the boom years, at around 8 500 in the fourth quarter of 2005 and again at slightly less than that a year later, when overall value of transactions stood at its highest level of  a little over 500 million Euros; the low point (first quarter of 2009) saw around 2 000 deals and a total value of less than 100 million Euros.

Average prices peaked at in the second quarter of 2007 at around 1 200 Euros per square metre, reaching a low of approximately half that (600 Euros per square metre) in the third quarter of 2009. The average price per square metre currently stands at around 700 Euros per square metre.

The full article (in Estonian) along with detailed graphs depicting overall value of apartment deals, number of transactions and average price per square metre going back to 2004 can be found here.

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