TALLINN - The real estate crisis hit a new low as agents warned foreign buy-to-letters not to invest in Tallinn's residential property market. The advice came as new figures revealed that rental incomes have fallen dramatically since August 2007.
According to second-quarter figures by Uus Maa, rental prices in Tallinn this year have come down almost 25 percent, or 500 to 1,500 kroons (32 to 96 euros) per apartment.
When a senior broker at Uus Maa was asked what advice she had for overseas investors looking to buy in Tallinn, she said it was impossible to find a good yield rate in the city, especially in the Old Town.
"The Old Town is a very bad investment. Rental prices are very low," the broker, who didn't want to be named, told The Baltic Times.
"This summer was very slow. It was just awful. I could hardly sell any properties. This is the worst I have ever seen 's there are too many offers," the broker said
And more misery is on the way both for owners and investors 's Uus Maa expects prices will decline further in September.
Real estate experts said that the scenario is very different from other European capitals, where the falling house prices have actually led to rises in rental prices.
Siiri Bentjarv, a spokesperson for Oberhaus, the largest real estate company in the region, explained that sellers are forcing prices down.
She explained that rental prices are so low because of a housing glut. People who bought as investors and who now cannot sell are desperate to cut their losses by renting out their flats.
"The rental rates are down because there are many, many places on the market," Bentjarv said.
Most apartments to let are in the city center, where there were 800 to 900 offers of unsold apartments in May and June. Apartments in new houses in the city center account for about one-fourth of all apartments on offer.
Rental periods are also going up. Two years ago, the average lease was six months. Now, most are one to two years.
Buy-to-letting (often called "fly-to-letting" when the investor is foreign) was once a popular activity, especially among investors from the U.K., Ireland and the Scandinavian countries.
According to industry sources, many naive investors came to the region during the property bubble. Many of them have subsequently gotten their fingers burnt as a glut of new development saturated the market and banks made it harder for locals to get credit.