SEB: Buying a home without a loan becoming increasingly difficult for people of Estonia

TALLINN - Although real estate in Estonia is more accessible than in the Nordic countries, it is increasingly difficult for the people of Estonia to purchase residential real estate in major hubs.

Furthermore, due to weak consumer confidence and geopolitical tensions, there is less interest in more exclusive real estate than before. The measure of real estate availability is how many square meters can be purchased per year for the average net salary. Real estate is considered affordable if one square meter, or at least 12 square meters per year, can be purchased for one calendar month's net salary. Ober-Haus Real Estate data shows that while 12.2 square meters can be purchased in Riga and 7.3 square meters in Vilnius, in Tallinn it is 7.2 square meters. In Helsinki and Stockholm, the figures are 6.1 and 5.1 square meters, respectively.

The real estate market activity in the Baltic countries is relatively similar. In the capitals of the three countries, nearly 19 transactions are made per 1,000 inhabitants during the year -- 18.2 in Riga, 19 in Tallinn and 19.3 in Lithuania. Since the population numbers vary between the capitals, the average number of transactions per calendar month is around 700 in Tallinn, nearly 900 in Riga and around 1,100 in Vilnius.

"In Finland and Sweden, the economic crisis of recent years has had a significantly stronger impact on market activity, and in Helsinki, the number of transactions decreased by almost half between 2021 and 2023. The situation in the Baltics is more stable. In the capitals of the three countries, the average number of transactions is similar to the average of the last four to five years. In Tallinn, real estate is more available than in Stockholm by almost a half, while residential properties in Riga are twice as available as in Tallinn," Tarmo Kase, member of the supervisory board of Ober-Haus Real Estate Advisors AS, said.

While Lithuania is facing renewed economic growth in the Baltic region, several tax changes have affected Estonian consumer confidence and geopolitical tensions have dampened sales of more exclusive real estate. At the same time, housing transactions are increasingly being financed with loans.

According to statistics from the Bank of Estonia, the volume of housing loans has grown faster than the volume of residential real estate purchase and sale transactions. While housing loans usually account for 40 percent of housing market transactions, in recent months this share has been over 50 percent. At the same time, SEB data shows that average loan amounts continue to grow -- in a year-on-year comparison, the average home loan issued has increased by 10,000 euros.

"In Tallinn, the average price per square meter remains around 3,000 euros, but in milieu valuable areas it can be significantly higher. Taking into account inflation and wage growth, there is no sign of a decrease in the price per square meter. Therefore, even a person earning slightly more than the average must take into account that buying real estate may require frugal living for a longer period of time. Therefore, it can be said that although the home buying market is active, buying real estate by simply saving and without taking out a loan is becoming increasingly unattainable. At the same time, the volume of home loans has increased significantly this year, which is a sign that the people of Estonia continue to strongly believe in owning their own real estate," Sille Hallang, head of SEB's private customer banking division, said.