Estonia’s house prices ready for 2018

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.