EU Membership
The accession of Estonia to the EU which took place in May 2004 is further increasing inward investment from other EU countries looking to take advantage of the country’s stable economic environment, flexible free-market attitudes and highly skilled but low wage labour market.
Estonia is set to receive the second highest per capita EU cash inflow of all 9 acceding countries. This will add a further boost to Estonia’s already rapidly expanding economy, increasing personal incomes and therefore boosting the property market. According to the EU Information Secretariat, the net fund inflow from the EU to Estonia will amount to 11.5 billion kroons (735.8 million euros) in the years 2004-6 (€365 per capita).
EU membership has typically produced a significant increase in property prices in the capital city of a joining country - residential prices in Stockholm grew by 108% between 1995 & 2002 following EU membership in 1995; similarly prices in Helsinki have increased by 77% between 1996 & 2002 following EU membership in 1995.
High Levels of Economic Growth
Estonia has consistently achieved high levels of economic growth (consistently averaging between 6% and 10% over the last 5 years) whilst maintaining low levels of inflation.
These growth rates are forecast to continue into 2007/8 making Estonia one of the fastest growing economies in Europe. Such growth is likely to lead to a commensurate growth in property prices over time.
The table below shows the Bank of Estonia’s actual and forecast (*) GDP growth rates.
| Estonian GDP (2003-2008) |
| |
2003 |
2004 |
2005 |
2006* |
2007* |
2008* |
Real GDP growth (%)
|
7.1% |
8.1% |
10.5% |
11.8% |
8.3% |
7.6% |
| GDP, billion kroons |
132.9 |
146.7 |
173.1 |
|
|
|
Source: Bank of Estonia, March 2007
Liberalised Investment Climate
Estonia offers a “liberalised, nearly tariff-free, open market economy with generally
healthy growth rates” (source: US Department of State Country Commercial
Guide ).
With its sophisticated, well-educated workforce and specialisation in growing service
industries such as IT, transportation and construction services, it is likely that Estonia
will continue to grow rapidly over the next few years.
The Estonian Government has an open attitude to the foreign ownership of property
and investment from overseas and this openness is encouraging foreign investment
in real estate. Private ownership and entrepreneurship are respected in Estonia.
Foreign investors can buy and sell residential property freely. As a result of this
openness, Estonia received the highest level of inward investment per capita of all
of the countries which joined the EU in May 2004.
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