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.  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. 

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. 

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. 
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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.