It may be estimated that the trends that prevail in the Tallinn real estate market could reach other parts of the country within three or four years.
The greatest increase in the prices of apartments in Tallinn was in 1998-1999, when the country's economy was at its peak. At the end of 1997, the number of housing loans fell dramatically due to the stock exchange crash, which brought about increased loan interests. As a result, the increase in the price of real estate stopped.
Cheap places on demand
In the second half of 1999, there was another rise in the market. Housing loan interest rates decreased and the conditions for applying for a loan became more favorable. Then, in 2000, the prices of standard apartments grew by 10 percent to 15 percent on average.
Due to more favorable loan conditions, the demand for standard apartments in the lower price class has increased. The fact that people tend to move to Tallinn while a very small number of Talliners leave the city produces even more demand and increases prices even further. Therefore, the greatest increase in prices may be predicted for standard apartments at Mustamae, Oismae and Lasnamae.
The prices of apartments in the center of Tallinn are less likely to increase during the years to come. At the current average, the price of a square meter of apartments in the center has already exceeded the level of 10,000 kroons ($600), the same level as the prices of inexpensive new houses.
This means that any further increase in prices is not possible. Prices may rise only for those houses that have a growing historical value (in the Old Town, primarily) and apartments with a unique location.
As the majority a potential and feasible development projects in the Old Town have been realized by now, only a few renovated apartment buildings are likely to enter the market.
Due to the small supply and the fact that buyers are not so sensitive to price, new price records may be set in the Old Town (in Toompea especially).
Due to rapid economic growth and the subsequent higher purchasing power of the population, the interest of investors in the construction of new apartment houses has grown. The total volume of apartment house projects under construction, according to data known to experts at the real estate company Uus Maa Grupp, is more than 60,000 square meters, or more than 800 new apartments.
Excess supply of offices
The price of office premises has reached its minimum level. There is excess supply in all quality classes. A number of new office buildings have entered the market during the last three years. As a result, excess supply in A-quality class office premises exists in the center of the city.
In spite of the analysts' prognosis of stability, top rentals in office buildings have gone down by 10 percent compared to the situation at the beginning of 2000.
The top rentals, which were on the level of up to 350 kroons per square meter in 1994, have fallen today to 220 kroons. It is not likely that there will be any further decline in prices, as profit margins have already fallen to a critical level for owners.
Due to low profitability, the construction of new office premises will be diminished, which in turn should lead to less vacancies in buildings and to an increase in rental fees. In most of buildings, the vacancy rate has stabilized at the optimal level of 5 percent to 10 percent, which allows room for tenants to move inside the building.
Trade gets compact
In Tallinn, trade is becoming more and more concentrated in new trade centers, due to comfort, inexpensive foodstuffs, a wide selection of goods and so on. As a rule, all trade centers about to be opened have been leased out in advance before completion.
Cases when center operators have the choice of several tenants for every leased place are not rare. The future does not look good for older centers with a small number of customers. In new, popular centers there is pressure for increases in rental fees, but these are unlikely to occur due to the lack of vacancies.
With the concentration of Tallinn's new town in the area from the start of Tartu Road up to Viru Square, trade is also coming to be concentrated in this area. Our forecast is that the level of top rental fees will shift from the Old Town to the new city (up to 700 kroons per square meter per month in the most attractive premises). The importance of the Old Town, together with the top rentals there, will decrease.
The importance of the Old Town as an area for trade is constantly diminishing, leaving space for services and catering to prevail. The orientation to tourism dominates, such as the selling of souvenirs.
Another new trend is that niche department stores are emerging in the Estonian market, which offer goods for specific target groups or sell certain types of goods, like sports and recreation products.
2024 © The Baltic Times /Cookies Policy Privacy Policy