Estonia has low interest rates, and moderate to good rental yields. Little wonder that despite weak economic growth, during 2016 the average price of apartments in Tallinn increased 12% (9.54% inflation-adjusted) to €1,744 per square metre (sq. m), according to OberHaus. This was a sharp increase from the price rises of 3.87% the previous year. During the last quarter of 2016, apartment prices in Tallinn rose by 3.2% q-o-q (3% inflation-adjusted).
This is in line with national figures released by Statistics Estonia. The average price of Estonian dwellings rose nationally by 10.66% (9.25% inflation-adjusted) in 2016, to €1,148 per sq. m..
A short history of the Estonian property cycle
Estonia’s housing market was in continuous boom from 2000 to 2007, with house prices nationwide rising by 36% annuallyfrom 2004 to 2006. This was due to the following factors:
- low interest rates
- low inflation
- strong economic growth
- rapid wage increases
- huge foreign demand for property, especially from other Europeans
All of the country’s major cities experienced strong house price rises during the year 2016, according to Statistics Estonia:
- In Tallinn, Estonia’s capital, the average price of dwellings purchased increased 8.74% to €1,692 per sq. m. in 2016, after a rising by 4% y-o-y last year.
- In Tartu City, the second largest city and the intellectual capital of Estonia, the average price of dwellings purchased rose by 7.54% y-o-y to €1,247 per sq. m. in 2016.
- In Parnu City, the country’s summer capital, located in the southwestern, the average price of dwellings purchased rose by 8.14% y-o-y to €999 per sq. m. in 2016, after rising by 15.89% a year earlier.
- In Estonia excluding Tallinn, the average purchase price of dwellings rose by 9.85% to €676 per sq. m. in 2016, after an annual rise of 8.11% in 2015.