TALLINN - With sales figures continuing to fall and the real estate market showing no signs of a quick recovery, experts say house and apartment prices look set to keep dropping in the New Year.
The Estonian-language daily Postimees reported that November marked a record low in sales figures, with only 382 sales taking place 's a significant drop from the 535 deeds exchanged in October. The previous low point took place in August, when 505 transactions took place across the month.
It is not just sales that are dropping; last month the average property price per square meter fell to the record low of 18,887 kroons (1,207 euros), representing a 7 percent decline on last month, which saw the previous low at 20,396 kroons.
Given that January's average was 23,840 kroons, it is now clear how dramatically the real estate market has suffered in the current downturn. Moreover, analysts have estimated that Estonia's apartment value has declined by 25 percent during the crisis, and land prices further still.
Annika Jakobson, a consultant at Uus Maa real estate agency, told business daily Aripaev that prices have been scaled back to 2005 levels.
"The average price of an apartment sold in Tallinn is now back to where it was in 2005, mainly because of three reasons: first, the banks' reluctance to finance the transactions, second, falling public confidence and, third, the expectation of further price cuts," Jakobson said.
Yet Uus Maa CEO Mika Sucksdorff told Aripaev the market is likely to bottom out, though he did not cite tangible evidence to suggest why this might be 's causing some to speculate the claim from one of the industry's biggest players was little more than a thinly veiled attempt to entice prospective buyers.
Contrary to Sucksdorff, Carl Wells, a British expatriate and senior consultant at the Tallinn-based Goodson and Red Real Estate, told The Baltic Times that it's hard to gauge when the market will bottom out.
"It is very hard to gauge how much further the market will drop before reaching 'rock bottom.' It may become more apparent when the majority of 'burnt' buy-to-let investors, short term speculators and recently unemployed private buyers have sold off their previously overpriced properties at discounted prices and banks have recovered from their recent, over-ambitious lending policies," Wells said.
Wells said the strength of the market is largely tied to the progress of the currently troubled economy, as foreign investors will be looking for signs of economic progress before reinvesting in the Baltics. In the meantime, he said that prices will continue to fall.
"Prices are likely to continue to decline until the property 'over-supply' has depleted, financing becomes available, international buyers confidence returns or local buyers can support the market by increasing salaries, creating jobs, etc.," said Wells.
He said that a lack of interest is likely to drive prices even lower into the New Year.
"The New Year will be very quiet I am sure, things will be very slow and you will see some increasingly good offers from developers and private sellers alike," he said.