Consistent Upward Trend in Property Prices

Property prices , even in the historic centre of the attractive capital city, Tallinn, are still relatively low though are increasing rapidly.

Over the last 9 years, property prices have risen consistently by, on average 15% - 20% per annum.

Prices are likely to continue to rise by 10% per annum largely due to the increase in the costs of constructing new properties which in turn tends to feed through into general real estate prices.

Finnish Influence

Prices of property in the Finnish capital, Helsinki which lies only 55 miles away from Tallinn (just 18 minutes by helicopter & only 1 hour 25 minutes by hydrofoil) have increased significantly since Finland joined the EU in 1995 and, more recently, adopted the Euro. Property prices are, on average, 300% higher in Helsinki than in Tallinn, with city centre apartments generally priced around €200,000.

The geographical proximity of the two capitals, the similar languages spoken in both countries (they are both Finno-Ugric languages) and the high levels of Finnish investment in Estonia are all contributing to an increase in the number of Finnish people looking to buy property in Tallinn either for investment purposes, second homes or for businessmen working in Estonia. These factors are likely to cause a convergence in property prices between the two capitals over time.

Increasing Tourism

Tallinn’s very attractive, medieval old town attracts large numbers of tourists and it is likely that tourism will increase further as Tallinn becomes increasingly popular as a city-break destination. This should provide further stimulus to real estate demand and put upward pressure on prices particularly in the historic city centre areas.

The commencement of cheap Easyjet airline services from both London Stansted and Berlin along with the continuing expansion of routes from Estonian Air have provided significant further stimulus to tourism in the city and further demand for apartments for holiday or investment uses.

Increasing Local Demand

The banking sector in Estonia, which is largely based upon Scandinavian principles and investment, is well developed, stable and offers high quality mortgage products linked to EU EURIBOR rates.

Increased competition between banks has driven down mortgage interest rates (from 11% in 2002 to 4% in 2007) and this, in turn, has encouraged Estonian citizens to take out residential loans thereby increasing the demand for property.

Consumer Confidence

Estonia’s growing economy and the optimism about EU membership has boosted consumer confidence
across the country. Most Estonians now anticipate that their incomes will increase in the future and are therefore more confident about investing in property.

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