In Tallinn, the capital of Estonia, the average price of dwellings was up 10.4% on the year ending in Q2 2011, to €1,033 per square metre (sq. m.) (up 4.9% inflation-adjusted), according to the Statistical Office of Estonia.
Nationally the average price of dwellings was up 10.6% to €703 per sq. m. during the year to end-Q2 2011. When adjusted for inflation, Estonian house prices rose by 5.2% over the same period.
It has been a rough ride. After amazing 37% annual house price rises from 2004 to 2006:
After these 3 horrendous years, the house price recovery began in the second half of 2010, and during 2010 the average price of dwellings was up 4.1% (-1.1% inflation-adjusted).
Yet things seem to be moving. Some say construction of at least 10,000 new residential units in Tallinn could begin before the year ends. There were 2,245 dwelling permits granted in the year to Q3 2011, up 21% on last year, according to the Register of Construction Works. In Q1 2011, transactions in Estonia rose by 3% from a year earlier, though they were down 29% from the previous quarter. Why the poor quarterly data? Probably, increasing property prices were slowing buyers’ decision-making processes.
But despite rising house prices, strengthening construction and transactions volumes, the travails of the eurozone could yet spook the market. Estonia joined the euro this year after many years of effort – only to find the club in disarray.
Nationally the average price of dwellings was up 10.6% to €703 per sq. m. during the year to end-Q2 2011. When adjusted for inflation, Estonian house prices rose by 5.2% over the same period.
It has been a rough ride. After amazing 37% annual house price rises from 2004 to 2006:
- In 2007, the average price of dwellings dropped by 1.5% (-9.7% inflation-adjusted)
- In 2008, house prices fell 18.3% (-24.5% inflation-adjusted)
- In 2009, house prices dropped 30.5% (-29.1% inflation-adjusted)
After these 3 horrendous years, the house price recovery began in the second half of 2010, and during 2010 the average price of dwellings was up 4.1% (-1.1% inflation-adjusted).
Yet things seem to be moving. Some say construction of at least 10,000 new residential units in Tallinn could begin before the year ends. There were 2,245 dwelling permits granted in the year to Q3 2011, up 21% on last year, according to the Register of Construction Works. In Q1 2011, transactions in Estonia rose by 3% from a year earlier, though they were down 29% from the previous quarter. Why the poor quarterly data? Probably, increasing property prices were slowing buyers’ decision-making processes.But despite rising house prices, strengthening construction and transactions volumes, the travails of the eurozone could yet spook the market. Estonia joined the euro this year after many years of effort – only to find the club in disarray.
Analysis of Estonia Residential Property Market »
RENTAL YIELDS
Last Updated: Jun 10, 2011
Gross rental yields on very small apartments in Tallinn seem to be recovering slightly, and we record 5.2% average yields on apartments of 35 square metres, up from 4% a year ago. Well, the sample size is small, and some of this may be ‘noise’, but something seems to be happening. This is consistent with what would be expected in an economic recovery.
Yields on apartments of 120 sq. m. are still low, at around 3.6%.
Yields on apartments of 120 sq. m. are still low, at around 3.6%.
TAXES AND COSTS
Last Updated: Nov 18, 2010
Rental Income: Nonresident individuals are liable to pay 21% withholding tax on their gross income. No deductions and personal allowances are given. Withholding taxes are final taxes, so the non-resident has no obligation to file tax returns.
Capital Gains: Capital gains from the sale of immovable property are aggregated with other income and taxed also at 21%.
Inheritance: There are no inheritance taxes in Estonia.
Residents: Residents are taxed on their worldwide income at a flat rate of 21%.
The previously announced income tax rate reductions have been cancelled.
Capital Gains: Capital gains from the sale of immovable property are aggregated with other income and taxed also at 21%.
Inheritance: There are no inheritance taxes in Estonia.
Residents: Residents are taxed on their worldwide income at a flat rate of 21%.
The previously announced income tax rate reductions have been cancelled.
BUYING GUIDE
Last Updated: Mar 07, 2007
The main cost is the realtor’s fee, which varies between 2% to 4% depending on the size of the apartment. In addition there are 0.5% notary fees and a registration fee of 0.25%. All costs are paid by the buyer.
LANDLORD AND TENANT
Last Updated: Jun 01, 2006
Estonian rental market practice is pro-tenant.Rents: ‘Luxury’ housing category is free from rent control. Other housing is subject to a prohibition on “excessive rents” (Law of Obligations S301). The landlord can ask for up to three months’ deposit.
Tenant Security: Contract periods can be freely agreed between landlord and tenant, but there are dangers – upon expiry of a specified term lease, the tenant may demand that the contract be extended for up to three years, and in fact the tenant can demand repeated extensions. In addition, unless care is taken, specified term contracts can default to ‘unspecified term contracts,’ in which tenant eviction is difficult.
ECONOMIC GROWTH
Last Updated: Oct 24, 2011
Estonia’s economy strong, euro-adoption seems not to have harmed
Estonia is a small country of 1.3 million people. The most prosperous Baltic state, its success is attributable to bold liberalization measures adopted in the early 1990s. It was the first Former Soviet Union (FSU) state to be invited by the European Union (EU) to start negotiations in 1997, and was formally admitted into EU in May 2004, a few months after NATO membership. From 2001 to 2006, Estonia’s economy expanded by an average of 8.7% annually, including resounding 11.2% GDP growth in 2006, and 10.2% growth in 2005. In 2007, GDP growth was 7.1%, one of the highest economic growth rates in the EU. Unemployment fell from 13.6% in 2000, to just 4.7% in 2007.
The economy entered recession in Q3 2008, contracting by 3.6% in 2008, followed by a 14.1% contraction in 2009. Unemployment surged to 13.8% in 2009.
Estonia implemented prudent macroeconomic policies in 2010, and the economy recovered with GDP growth of 3.1% and a fiscal budget surplus. Nevertheless, unemployment rose to 16.9% in 2010. In the first quarter of 2011, the economy expanded by 8%, mainly due to strong exports. In January 2011, Estonia was the first country to join the Eurozone since the financial crisis. This year, real GDP growth is expected to be 6.5%.
In the second quarter of 2011, unemployment was down to 13.3%.
The country’s inflation rate was 2.9% in 2010, up from -0.1% in 2009 but down from 10.4% in 2008. In September 2011, consumer prices rose by 5.2%, mainly due to rising global prices of food and fuel. The inflation rate is projected to settle at 5.1% by end-2011.
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