PARNU - Ask any Estonian to describe Parnu, their country's "summer capital," and they'll tell you about the quiet, tree-lined streets and the quaint, wooden villas. Visit the area now, however, and you can't help but notice something different: around nearly every corner you turn are construction sites and billboards that show gleaming, 21st-century apartment buildings. It's obvious that the shift from re-selling existing apartments to developing and selling blocks of new apartments, a change that Tallinn underwent several years ago, has headed south, and is now taking this small, seaside town by storm.
With construction running at a pace not seen since the 1970s and '80s, many in the real estate industry, such as Raul Sarandi, a specialist from Ober-Haus real estate company, have no hesitation in calling this phenomenon, which has been steady for a couple of years now, an apartment building "boom."
"Whoever has land and can build is thinking of how they can build faster and bigger," says Sarandi, referring to entrepreneurs partnering up with construction companies and real estate brokers to create everything from luxury, seaside apartments to tiny, utilitarian studios.
Sarandi predicts that within the next year to 18 months, there will be as many as 1,500 new units coming to the market, a staggering figure considering the town's population is less than 45,000. Representatives from competing firms gave more conservative 's but still impressive 's estimates of around 1,000 new units over the next year.
One of the major driving forces behind the growth, say brokers, is an increased demand from foreign buyers who, particularly after Estonia's entry into the EU, are discovering Parnu both as a resort getaway and as a place to invest.
"It's becoming a very international city," says Peep Sooman, board chairman of the nation-wide Pindi Real Estate Agency. "[At first] it was mainly Finns, but now there are lots of people from other Scandinavian countries and from other European countries, Germans, Dutch, French and so on."
"More and more foreigners are keen on buying their own property, to keep during the winter and to live in [during] the summer, and they are waiting for a growth in prices," he said.
They may not have to wait long. Prices have gone up approximately 40 percent in the last five years, according to Ingmar Saksing, a broker for the local LVM Real Estate. The average square meter in a new Parnu apartment currently ranges from 13,000 kroons (830 euros) to 16,000 kroons, with the high-end reaching as much as 25,000 kroons.
Foreigners, however, aren't the only ones taking advantage of this investment opportunity. Brokers also cited a large increase in the number of buyers from Tallinn. These now make up about one-third of the total, roughly equalling the proportion of foreign buyers.
The Estonians' purchasing power has been given a huge boost of late by the availability of low-interest loans, many with rates of less than 3 percent, making it much more economical to borrow money and buy an apartment than to rent.
"It's an interesting time," says Sarandi. "I think that to not take money from the bank at this time would be stupid. The inflation is bigger than the interest you have to pay."
Low-interest rates aside, LVM's Saksing pointed out another reason the new apartments are in such demand with locals - namely that buying an initially expensive new apartment is less trouble and may actually be cheaper in the long run than buying an existing Soviet or pre-Soviet-era apartment.
"With older apartments, you have to spend money for fixing the roof, fixing the stairs, fixing the pipes, everything. The maintenance costs per square meter are higher, and the heating costs are higher because the windows are not insulated and maybe the walls are not built according to the norms," Saksing explains.
With such frenetic building and buying taking place in this small town, the question inevitably arises - where is the market headed?
"We're in a little bit of a strange situation as to where the market is, on behalf of both sides," says Sooman. "The demand is huge, but at the same time the offer is huge."
Conventional wisdom holds that the demand for residential property in Parnu will always be strong, especially considering that the town's population swells to as much as 100,000 during the summer season. Developers, most of whom predict a levelling-off in growth within the near future, are still having no trouble selling apartments and brokers. And like Sooman, most remain optimistic.
"Let's be realistic 's what goes up must come down someday, or at least stay stable. But we believe it's not going to happen in 2005 or 2006," he says.