Luminor: Estonian real estate market seeing slight uptick ahead of VAT increase

  • 2025-05-29
  • BNS/TBT Staff

TALLINN - Significantly more apartments were sold in Tallinn during the first quarter of this year, just before a VAT increase, than during the same period in the previous two years, according to Luminor.

"In January, 712 apartment transactions were recorded in Tallinn, according to the Land Board, followed by 705 in February and 707 in March. The number of transactions fluctuated by only 1 percent over the three months, which is a rare degree of stability," Helina Kikas, head of home loans at Luminor, said.

In total, 2,147 apartments were sold in Tallinn in the first three months of this year, compared with fewer than 1,900 transactions during the first quarter of each of the past two years.

"The first quarter shows that the Tallinn real estate market is functioning well. In 2023 and 2024, the Euribor completed its upward cycle, and now that it is on a downward and more stable trend, we are also seeing increased consumer confidence," she added.

Kikas noted, however, that the beginning of this year still does not compare to the boom period in the market -- in 2022, 2,303 apartment transactions were made in Tallinn during the same period, and in 2021, as many as 2,578.

She added that this year's level falls short of those strong years mainly because the share of new developments in the total volume is modest. In March of this year, new development sales in Tallinn were the lowest for that month in the past five years.

"With VAT rising from 22 percent to 24 percent in July, this is likely to bring a moderate increase in new development sales in the second quarter. As we saw with the car tax, the period after the tax comes into effect, this time the third quarter, may be quieter than usual," she said.

Considering that the price gap between new developments and the secondary market is currently wider than usual, Kikas believes the situation could balance out through price stagnation in the new development segment.

"Secondary market prices are likely to rise in the near future, as this segment is very active and the price gap with new developments is large. The secondary market will push prices upward, while new development prices will likely not rise sharply anytime soon -- developers are waiting for the secondary market to catch up," she predicted.