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Uus Maa: people often sell their real estate under pressure

Uus Maa: люди часто продают свою недвижимость вынужденно

The first shock after the interest rate hike hit the Estonian real estate market at the end of 2022. After this, we observed an adaptation of all market participants, which led to a decrease in activity levels by 20-30 percent from the peak level, reports the real estate bureau Uus Maa. Apartment building in Tallinn. The photo is illustrative. Apartment building in Tallinn. The photo is illustrative. Photo: Konstantin Sednev / Postimees Grupp

The first shock after rising interest rates hit the Estonian real estate market at the end of 2022. After this, we observed an adaptation of all market participants, which led to a decrease in activity levels by 20-30 percent from the peak level, reports the real estate bureau Uus Maa.

All key indicators (number of trades and median price) again reached the market bottom. An increase in the number of offers by more than 25 percent indicates that people are often forced to sell their property.

Those selling their only home are also moving into the rental market, which shows a decrease in supply on the market and an increase in prices. Since the rental market is more efficient than the sales market, this indicates the direction the sales market will be heading in the near future. In the medium term, new growth in the real estate market will be driven by economic growth and increased purchasing power of people. Prices are already rising in developed markets, but our market's previous rapid growth and prolonged economic downturn are extending the recovery time.

Across Estonia, fewer than 1,450 apartment property transactions were concluded in June, which over the past two years was only exceeded by the results of January and February 2023 and January 2024. Compared to last year, 28 percent fewer transactions were concluded. For the fifth month in a row, the median transaction price year-on-year also declined, falling by six percent to €2,114/m². In the first half of the year, about 9,200 transactions were concluded, which is 12 percent less than in the same period last year. The median transaction price (2021 €/m²) was five percent lower compared to the same period.

In Tallinn in June, according to preliminary data, only 573 transactions were concluded, which was the third time this year when the number of transactions was below 600. In the first six months, according to preliminary data, 3,631 transactions were concluded in Tallinn, which is 17 percent less than in last year for the same period. If we take into account the real activity of the market, including sales of new buildings through public offerings, and not on the basis of previously concluded transactions, then here too we see a decrease in activity.

The decline is widespread

There were approximately 25 fewer deals completed in June than expected, and the secondary market also saw a significant drop (about 20% compared to the previous 12 month average). The median transaction price compared to the first half of last year decreased by one percent (2836→2796 €/m²). However, the condition of the apartments that reached the deal has improved, so to reach an agreement, an apartment in average condition must be traded at a discount of up to ten percent from the offer price. The number of listings on the market has increased significantly (+28% year-over-year) and the listing price has fallen 2.5 percent from its peak.

Among the largest cities, Tartu performed best compared to the first half of last year – the number of transactions decreased by 14% (886→764) and the median price decreased by only three percent (2476→2402 €/m²). The decline was mainly due to a decrease in the share of new buildings, while the increase in the number of offers was moderate compared to other regions (+13% compared to June last year). In June, 105 transactions were concluded, which exceeded this year's result only in January. The median price of transactions in June was 2449 €/m², which corresponds to the level of June last year.

The fall also affected Pärnu

The Pärnu real estate market suffered the most among large cities. Pärnu is known as one of the most speculative markets in Estonia, so the decline there is usually one of the longest. Compared to last year, 33% fewer transactions were concluded in the first half of the year, and the median price decreased by eight percent. The price level remained stable, but due to a sharp decline in the number of transactions with new buildings, it decreased statistically.

In the first half of last year, more than a hundred transactions with new buildings were concluded; in this half of the year, more than two times less. The number of transactions in the secondary market also decreased by more than 20%. There were 58 deals in June, the second-best result of the year. The median transaction price was 2041 €/m². The figures for the first half of this year amounted to 293 transactions and a median price of 1950 €/m².

In Narva, the number of offers also increased, but the number of sales in June was the lowest this year. 53 transactions were concluded, which is 21 less than a year ago. In the first half of the year, according to preliminary data, 394 apartment properties were sold, which is two percent less than last year. Offer prices are stable, but transaction prices have decreased slightly. The median price of transactions in June was the lowest this year (451 €/m²). The median price for the first half of this year was 506 €/m², which is four percent lower than last year for the same period.

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