What causes the active growth of housing prices in Estonia
There has been a steady increase in housing prices in Estonia. Last quarter, the price index for this type of real estate was 21% on an annual basis, the quarterly increase was 7.1%. If we compare the dynamics with the last months of 2021, the cost of apartments in the country increased by 8%, and private houses went up by 5.4%. During the same period last year in the previous quarter, the price of apartments increased by more than 20%, and the price of houses increased by almost 23%.
The residential real estate price index shows the change in the cost per square meter. The number of closed transactions for the purchase of apartments and houses is used for it. The index also increased, reflecting the dynamics of the value of owner-occupied housing. This index showed an increase of 3.7% for the quarter and 13.9% for the year. The index provides insight into changes in the price of new homes purchased by consumers. In addition, the index also takes into account related expenses – repairs, property insurance, and the purchase of home goods and services.
The Estonian regulator has recorded an increase in real estate prices in provincial towns. For 10 years, objects have risen in price by 4 times, an increase in housing costs primarily recorded in the center and the southern part of the state. Here the price increase is 20% for the year. Experts say the main reason for the rise in prices is a lack of supply. The southeast of the country is popular for summer holidays, so there is an increased demand for vacation homes, land within the city, and apartments. In addition, the markets of small towns do not have new apartments, both for sale and for rent. As soon as such an offer appears, they are taken away in just a few days. As a consequence, the demand for housing in the regions exceeds several times the options available for sale.
The number of home loans in small Estonian cities has also increased. The market in the city of Võru is a vivid example of price changes. In 2021, an apartment in the central part cost 600 euros per square meter, today the price has increased to 850 euros per square meter. The average cost of a new building in the city is about 1500 euros per square meter. m. Over 12 months the prices rose by 20%, and the rise in price affected rental rates. Despite the rise in value and high demand, the construction of new facilities in Vyru is very weak. Experts say that in this case, banks that do not consider the southern regions of the country as promising, slow down the development of the market. As a result, they do not give credit to developers, and the latter can not start new projects.