Real estate market trends this year: recovery, scarcity, and apartments by the sea

  • 2023-03-09

Endover, which last year had the largest turnover in new deals among real estate developers, presents its forecasts for the real estate market for 2023. The most important of them are a slowdown inTallinn price decline, getting used to higher interest rates, a revival of the market, a shortage of new apartments and the popularity of apartments by the sea in Tallinn.

A total of 1,235 apartments in new buildings were sold in Tallinn last year, with Haabersti being the most popular area. The total value of transactions with apartments amounted to 330 million euros, with the average price of a new apartment purchased in the capital amounting to almost 267,000 euros and 4,191 euros per square meter. Last year, about 1.6 million euros were paid for the most expensive apartment in the new building. Most transactions with new apartments were concluded by Endover, Merko, Bonava, Invego and YTI. See the pivot table for more details.

Endover CEO Robert Laud described trends and forecasts for this year for the new housing market in Tallinn.

Property buyer

- A homebuyer who has been postponing a deal for a long time adjusts to market conditions and starts buying again.

- Although the increase in Euribor and energy prices has significantly influenced people’s purchasing decisions, those planning to buy an apartment usually do not postpone the transaction for more than six months.

- A buyer, sensitive to price, loan conditions and utility costs, will buy smaller apartments.

- A rental-focused small investor, hit hardest by the Euribor hike, is biding its time to buy, or listing property for sale.

- A rich investor continues to buy more expensive investment apartments and invest spare funds in real estate to counter inflation. ·       Foreign buyers’ interest in deals has waned and the investment boom in the tech sector has now subsided, but deals have not completely disappeared. The share of foreigners in transactions is about 5%.

Property location

- Investments are made in real estate, the location of which provides long-term growth in value.

- The cost of real estate in the centre of the capital and in Põhja-Tallinn is growing, the decrease of prices is observed mainly for apartments in panel houses.

- The most attractive area of Tallinn in terms of real estate is moving from the city center to the sea – from the Rotermanni quarter via Kalaranna, Noblessner and Volta towards Kopli.

- Haabersti, Põhja-Tallinn and the surrounding areas of the capital are popular with families with children. An important argument is the availability of infrastructure, including places in kindergartens and schools.

Real estate market

- Prices are stabilizing but have not yet increased this year.

- Buyers have overcome the interest rate shock, understand that they will have to factor in a higher Euribor in the future, and are no longer postponing their purchase decisions.

- Shortage of new apartments is expected: a number of developers have stopped several projects due to last year’s slowdown, so this year there will be fewer apartments than was the average for the past ten years.

- The current supply of new residences in Tallinn is estimated at 2,000 apartments, most of which are included in the portfolios of the major developers Endover, Merko, Hepsor and Bonava. Haabersti and Põhja-Tallinn remain the most active regions in terms of sales and have the largest stock of new housing.

- Developers foresee a new upsurge in 2024, so this year there will be a relaunch or start of several new construction projects that may go on sale this year but will not be completed until a year later.

Robert Laud: “It looks like buyers and developers are getting bolder again. We predict that deals will no longer be delayed for long. On the one hand, the shortage of new buildings increases the demand for well-located properties. On the other hand, people are getting used to the shock of higher interest rates, and as wages continue to rise, they are adjusting to higher bank loan payments. In addition, rising prices for building materials limit the fall in real estate prices. Therefore, we cannot expect a significant reduction in prices. The buyers are beginning to realize that there may not be enough choice in the second half of the year, as there are fewer new apartments on the market this year than last year – about 2,000. Despite the economic downturn, the value of the real estate in the seaside areas of Tallinn is growing.”

Endover’s offer this year remains at the level of last year – the company has the largest portfolio of finished apartments on the market. Construction of the new Riviera complex will also begin this spring in Viimsi.

Endover is an Estonian real estate developer with over 25 years of experience in creating a comprehensive residential and business environment in urban spaces. The company’s portfolio includes 70 buildings and 2,840 apartments with a total area of 368,000 square meters.

The data is based on real estate analyst Tõnu Toompark’s 2023 market statistics.