Market review November 2018

November reflected rather well the slightly worrisome situation that has developed due to the changes in the market but we can make more accurate conclusions within the next six months.

It is true that on the one hand, the feeling of security of the consumers for purchasing or renovating their home has decreased, as has decreased the feeling of security in all the building sector. In the market that is expressed by slower pace of growth in new developments and the extension of pre-sale periods, even though the demand of end consumers regardless of the increasing prices is very high. It probably means that the risks of instability in the market may deepen and there are increasing possibilities of a so-called correction.

After the active October, about 80 apartment transactions less were concluded in Tallinn, and the number dropped in comparison to November 2018. At the time where the secondary market has remained stable or even shrunk a little, it is reasonable to look at the market of new developments as the reason for bigger changes in the number of transactions. So it was in November when 837 apartment transactions were concluded. The median price of transactions has stabilised in Tallinn, which refers to the reduced profitability in the real estate sector, as the construction prices are increasing.

For 11 consecutive months, the median price of apartment transactions has been over 1,700 EUR/m2, in November, the figure was 1,739 EUR/m2, which was 2.8% higher than last year. In the first 11 months of this year, the growth in the number of transactions has slowed down: in comparison to last year, 173 apartment transactions more have been concluded and the median price of those has increased by 6%. In 2017, the same figures were +548 transactions and +8.3%, respectively.

At the time when the market in Tallinn has become more careful, Tartu and Pärnu are marching one-two steps behind, in a more optimistic rhythm. Such a pattern has characterized the free real estate market virtually for the past 20 years – Tallinn is the first to react to both rises and falls, followed by its close surroundings and Tartu and Pärnu, then other areas where many locations have experienced no price increase or increase in the number of transactions.

Unlike in Tallinn, it is possible to speak of increased activity in the market of new developments in Tartu and Pärnu; in comparison to the low baseline of the past two years, Tartu has been especially outstanding.

In the 11 months of this year, the number of apartment transactions in Tartu has increased by 311 and the median price by 8.3% in comparison to the same period last year. In November 2018, 169 transactions were concluded in Tartu, and the median price was 1,373 EUR/m2.

Even though the development market itself is growing, the limited volume of a small market has inhibited the growth in the number of apartment transactions in Pärnu this year. In the first 11 months, it has even decreased by 110 (841→728). In the comparison of years, also the increase in median price has slowed down (+6.6% this year, +15.4% last year). In November, 54 apartments were sold in Pärnu, with the median price of 1,133 EUR/m2.

The market of Narva has moved backwards in regard to the prices since the II half of year 2014. However, the regress has been slow, in four years the median price has dropped by nearly 100 EUR/m2. The number of transactions has contained more rises and falls, in 2016, the number of transactions dropped by nearly 100 due to the drop in the price of raw materials, although in 2017 and 2018 the market has nicely recovered. Still, the number of transactions of about 650 means that in spite of the nearly 15,000 difference in the number of inhabitants, in Narva fewer real estate transactions are concluded than in Pärnu. Such a difference has mainly been caused by the fact that the regions are vastly different, both in regard to purchasing power and consumer security. In November, 53 transactions were concluded in Narva, which was less than the average number of transactions this year, but the median price exceeded the line of 400 EUR/m2 for the first time since May.

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