Tartu rental market gets new life

  • 2003-03-20
  • Kristjan Teder

Tartu is currently undergoing a real estate boom. Developers are preparing to flood the market with several hundred new apartments and fresh commercial spaces in an effort to satisfy pent-up demand.

Despite being Estonia's intellectual hub, Tartu has seen little activity on the real estate market and pales in comparison to dynamic Tallinn, where new development projects are announced virtually every day. Still, the Tartu apartment market can be rather brisk, though this is mostly due to large numbers of out-of-town students who have limited financial resources and rarely look beyond cheap accommodation in wooden houses and concrete block apartment buildings.

This year, however, overall economic growth and an increasing number of newcomers are combining to boost demand for quality living space.

Several new apartment blocks were fully sold out long prior to completion. Driven by a fall of interest rates - with loans having been slashed to 5 percent and below - lower-income segments of the population are using the once-in-a-lifetime opportunity to purchase property.

Real estate agents worry that the market may overheat.

"Should all the outstanding projects be completed, sales could wind down," said Urmas Makko, chief broker at the Tartu branch of Tonissoni Real Estate. "Everything depends on pricing. The local market is rather sensitive in this aspect."

In addition to the dozen or so middle-class-oriented apartment projects, there is also the odd project aimed at the wealthy end of the market.

One example is an apartment block in the former City Museum building adjacent to Dome Hill, offering calm and picturesque views just a couple of minutes walk from the city center. With price tags of 1.4 million kroons (90,000 euros) and up - topping out at 3.3 million kroons for a 5-room apartment - the project has prompted some skepticism over sales prospects.

Some agents, however, are confident that the demand is there. "The occasional luxury projects should be quite a success. With brilliant locations and such views, there's really no competition," notes Makko.

Other high-end projects include a new building at the edge of Supilinna (Souptown) district and a revamped former downtown jail.

In addition, Makko sees a niche for decent new row houses. "There is some demand for new row blocks, since such projects haven't been actively pursued for a couple of years now."

Also, plots and residences in Tartu suburbs are increasingly popular, as a dearth of quality city space is pushing most new housing projects out of the city's limits.

This growing demand is naturally spilling over into the commercial market. Leading retailer ETK has just announced plans to develop a new 18,000-square-meter shopping mall, easily surpassing the 15,000-square-meter mall at Lounakeskus.

Construction of the 100-million-kroon center is to start in late March. With a sports club, pub and numerous boutiques, the mall will become the centerpiece in Annelinn, a Soviet-era district of cheap concrete blocks.

The Kaubamaja shopping center in the heart of Tartu, which experience some cash flow problems two years ago, continues to stagnate. No new deadlines have been set.

Meanwhile, haggling continues over a new inter-city bus terminal and commercial complex just across the street from Kaubamaja's gaping hole. The project should have been completed long ago but instead languishes in bureaucratic limbo.

Plans for reshaping the hotel sector, with an eye of developing tourism conferences, are still under discussion. Tartu's current accommodation potential is only 750 people, but two planned projects - riverside hotel in the vicinity of the Atlantis center and another conference hotel attached to Vanemuine Concert Hall - would add 50 percent to existing capacity.

Local entrepreneurs have long dreamed of turning Tartu into Estonia's conference capital by using the town's competitive prices and academic atmosphere. However, construction work at the two hotel sites is not scheduled until 2004, further delaying the town's ambitious plans.