TALLINN - Estonian leading real estate experts are saying expectations that real estate prices would go on rising are unfounded, and they warn that if current trends continue and developers keep building more expensive housing properties, then the Estonian real estate market could go into recession in 2005.
According to experts, prices have nowhere to grow, and more importantly, expectations that the EU accession will bring more buyers to the market are overoptimistic.
Indeed, experts say that many buyers have been acquiring apartments with the sole purpose of making a "quick killing" on a price-rise that will allegedly come after May 1. The new high-rise apartment building on Maakri Street in central Tallinn has already sold dozens of apartments that cost at least 1 million kroons (64,500 euros) each.
Ain Kivisaar, analyst at Uus Maa, said that developers obviously overestimated the impact of EU accession.
"All those who have purchased real estate in the expectation that prices will continue growing next year will be looking for these mystic rich foreigners. But there are not enough of them for all sellers," said Kivisaar.
He added that while a drop would not trigger any real market crisis, prices for centrally located apartments could fall by 10 percent.
This opinion was supported by Jaan Liitmae, head of the private financing department of Hansabank, who said that the first expensive apartments that were purchased for speculation have already come to market. Ville Jehe, board chairman at the Internet portal Delfi, was one of the people who has acquired expensive apartments in the hope of reselling them at a profit. He said that he purchased two apartments in the Maakri building for around 1.5 million kroons apiece.
Jehe stressed that he would not live in the apartments himself but that he planned to resell one at a profit - to a foreigner - and lease the other.
"I hope that I am able to resell the apartment already before Estonia joins the European Union in May," said Jehe, adding that he is willing to rent the apartment out for up to 20,000 kroons a month.
"I am an investor, and I see that there is room for higher prices," said Jehe.
