TALLINN - While the Churchill property scandal has undoubtedly scared off some foreign investment, it appears there are bigger threats to Estonia's buy-to-let market.
Carl Wells, senior property consultant for Goodson and RED Real Estate, claims the Churchill incident is a one-off affair and is in no way indicative of a wider problem with the Estonian market.
"Obviously there are scams that go on, but no more than happens in the U.K., for example," Wells told The Baltic Times.
"This is a one-off. This is purely an English entrepreneur who wanted to come over here and take advantage of the boom, and couldn't," Wells said.
However, with nearly a third fewer private properties being built this year as opposed to last, there is an undeniable sense of uncertainty from foreign buyers, which many attribute to the recession and credit crunch.
Acording to Wells, the economy is not necessarily the only reason. He suggests that escalating tension between the Baltic states and Russia is causing investors to be wary.
"I think a lot of them are gauging the situation with Russia. A lot of Estonians, even, are worried about buying, because they don't know what's going to happen. A lot of people are fearing the worst," Wells said.
"The intelligent investors are probably seeing that they really need to sort things out over here; there are a lot of underlying problems. So I don't think it's just to do with the world economy or property in general. At the moment Estonia has a few things to resolve," he said.
Yet Wells also acknowledges that economic factors play an important role. "Inflation is out of control, wages are low, banks are tight 's there are quite a few reasons why an investor would no longer really be considering Estonia," he said.
But while economic recession and diminishing bank liquidity are certainly not encouraging prospective investors, this lack of enthusiasm could turn out to be a blessing in disguise, according to property experts.
Earlier this year Peter Morris, managing director of Ober-Haus Real Estate Advisors, suggested in Baltic Business News that the current lack of interest in the Estonian property market will actually benefit existing investments in a few years time.
"When the market recovers and buyers become enthusiastic again, there will be significantly decreased supply on the market, and much less coming the year after. It is a classic end of this type of cycle that demand picks up stronger, there is no supply, and prices jump," said Morris.
"I can see something similar happening in Tallinn in one or two years if the number of new developments decreases any further," he said. Miller's remarks were made prior to Russia's invasion of Georgia, and a clash with Russia could easily disrupt market predictions.
