Astlanda OÜ board member Kajar Kruus has provided an interesting perspective on the current situation in the real estate market in Tallinn, the indicators and reasons behind its seeming upturn as well as shedding some light on the realities behind the downturn.
Speaking to Tõnu Toompark’s blog, Mr Kruus said that, in a sense, the crisis had been something of an illusion, since the high prices that sellers have been asking for were unrealistic, and currently there is a need for affordable housing in various market segments.
Today the situation regarding the real estate market has changed, he goes on to say. It’s even possible to state that there was a critical shortage of apartments in the real estate market in 2010. Good deals had already been snapped up very quickly, and virtually no new housing was replacing this, due to a lack of finance for purchases, he says.
Times have changed however, and money is now flowing into the real estate market as the spring waters flow into the sea, writes Mr Kruus somewhat poetically. Money is being offered to developers and campaings have been launched, presumably by the banks, targeting potential loans customers. There is a stock of new developments which are being sold out even more quickly than developers’ expectations, Mr Kruus states. Behind these successful sales lies a supply of standard flats with the better, erstwhile planning standards, reasonable prices and other thoughtful solutions attached to them, Mr Kruus says.
Positive examples are not hard to find, he goes on. A development in the Kalamaja district of Tallinn, units of which started selling in December 2010, immediately saw sales of a quarter of available flats, according to Mr. Kruus. Similarly, a development comprising 96 apartments in the Lasnamäe district which started in January has also seen a quarter of the units sold or reserved, he says.
The sale of the Toompark development on the fringes of the Kesklinn (city centre) began four months ago. Units there carry a price tag of around 1 690 Euros per square metre, and about half of them (37 in total) have been sold, Mr. Kruus states.
Reasonable prices for new apartments seem to have remained stable. However, the price of construction has increased by some 20-30% and seems likely to continue to do so, which could lead to inflated prices in the future, writes Mr. Kruus.
Today’s entry into the market of new residential projects and their rapid sales take-up have exacerbated the housing shortage, Mr Kruus believes. The property market in Tallinn and its environs is now ready to take on some 1000-1500 new apartments, he goes on. Furthermore, if the progress continues at today’s pace, next year could see a volume of new apartments which is as much as 15-20 per cent higher than today, he states.
Mr Kruus sums up by saying that the real estate market has picked up due to a demand for new projects. Furthermore he feels that the contemporary buyer wants a high quality apartment in a good location – something which the market overlooked during the boom years.
For the full report (in Estonian) see Tõnu Toompark’s blog here.