According to
Knight Frank’s latest ‘Global House Price Index’ Estonia once again
tops the list of worldwide property markets in terms of annualised growth;
the capital city of Estonia, Tallinn recorded growth of 17% in the first
quarter of 2006 on top of record annual growth last year of around 50%.
So what’s fuelling demand for property for sale in Estonia? What’s sustaining
the property price increases and is Estonia’s property market booming healthily
or about to explode and cause causalities? ShelterOffshore take a closer
look... Estonia
- and Tallinn in particular - has a very fast moving
property market where house sales can be completed, closed and over and
done with in as little as two weeks flat with the average house purchase
and conveyancing process taking a maximum of a month.
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Part of the
reason for the speed at which the sales process is completed is because
few people buying property in Estonia are already homeowners and therefore
the majority of buyers are not in a chain and can move more freely.
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Furthermore
low interest mortgages are fairly easy to come by in Estonia – in fact
since the issuance of the first low interest mortgages in Estonia roughly
five years ago the property market has really taken off.
The affordability
of home loans is fuelling mass demand for property to purchase. In Tallinn
especially, demand far outstrips supply despite the boom in property development
taking place.
Tallinn is
almost as popular a destination for the world’s construction vehicles as
Dubai with developers racing to complete brand new and renovated real estate
to sustain the local hunger for property.
Demand for
new property for sale in Tallinn is especially intense as residents
of Estonia long to escape from the former Soviet influence and live in
the lap of luxury in brand new, modern and fresh apartments.Renovated properties
are less popular and properties still in need of renovation less popular
still! So, while the supply of brand new housing stock is still failing
to meet the demand it is a seller’s market which makes for property price
increases – and while mortgages remain low interest and in abundance the
ability to afford property for sale in Estonia is achievable by many more
people – thus further fuelling demand, further increasing property prices
and further boosting the real estate economy in Estonia!
This all
sounds extremely positive for the short to medium term health of the
property market in Tallinn especially – but what about the ongoing ability
to afford debt and finance? Until very recently Estonians were unable
to borrow money or raise finance to buy real estate – in fact the concept
of a 25 year loan is not something that many older Estonians can truly
conceptualise. What will happen if the country has to raise interest
rates and the widely available finance begins to dry up and/or become less
affordable?
Well, on
the one hand there are no two ways about it – Estonia is booming particularly
as a high tech/IT nation. Job opportunities for professionals are
increasing in abundance and wages are also increasing which makes debt
affordable at the moment – but household debt has been increasing by up
to 50% per year for the past three years in Estonia and that sort of annual
increase cannot continue indefinitely. All of these factors mean that the
property market can continue to absorb the price increases for the short
term but it is highly likely that there will come a time when demand will
slow, supply will increase, affordability and the desire to afford new
property will slow down and the market will even out.
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Until then,
according to all the major indicators, property for sale in Estonia still
makes a great investment opportunity to consider for investors thinking
about buying a property in Eastern Europe and who are willing to accept
some risk in an emerging and rapidly developing market.
Rhiannon
Williamson writes about living abroad and investing in international
real estate. She also maintains www.shelteroffshore.com
- Shelter Offshore Investment & Real Estate which is an online resource
for expatriates, international investors and anyone planning a new life
abroad.
