Market review May 2018

The unusually warm, sunny and dry May still did not have enough power to reverse the transactions agreed earlier. Greatly thanks to the new developments in Harju County, for the third time in the past five years, over 2,000 transactions were concluded (over 200 transactions more than in April). The unusually high share of new developments increased the median price in comparison to last month by nearly 9%, and the result was, 1,399 EUR/m2 which was inferior only to last December and this January.

With the increasing share of new developments, the Estonian market has grown more and more similar to that of Harju County where in comparison to the first five months of last year, the number of transactions increased by 4.2% and the median price by 8%. Of the larger counties, the number of transactions has increased also in Tartu County (+4.9%), whereas Ida-Viru County is still at a low point (–8.3%) and the fall of the market in Pärnu County has been most of all influenced by a change in the division of new developments. Ida-Viru County is also the only one of the large counties where the median price dropped (–2.9%), in Pärnu County and Tartu County the prices increased by more than 10%.

For smaller counties, any change is always more related to the structure of transactions – in Põlva County, the number of transactions therefore increased by over a quarter, whereas an equal drop could be observed in Valga County. The amplitude of the median price was virtually as large and it was increased by the low value of the figures: in Viljandi County, the median price dropped by over one third, which was mainly caused by a reduced share of Viljandi City (within the city, the median price of transactions increased by over 17%), in Jõgeva County, the median price increased by nearly one third, even though in absolute figures, the median price only increased by 53 EUR/m2.

Both the statistics of transactions and the purchase activity show that Tallinn has adjusted rather well to the larger construction volume and price increase. 956 transactions were concluded in May, with median price of 1,743 EUR/ m2 – compared to the ordinary April, 75 transactions more were concluded in May and the median price increased by 1.4%, which in turn means that although the volume of transactions increased, the share of new developments remained the same. In comparison to April, the share of new developments increased most in Haabersti, Centre, Lasnamäe and Mustamäe, and the biggest increase in the median price took place namely in Haabersti and Mustamäe, the number of transactions, however, in the Centre, Lasnamäe and Mustamäe. The median price was the highest in the Centre (2,355 EUR/m2), whereas in Kristiine, the median price was virtually one of the lowest in Tallinn due to small flats in poor condition and the small share of new developments.

When comparing the first five months, the number of transactions has increased by 4.8%, the median price by 6.9%. Especially the increase in the median price has been extensive; it was the smallest in Nõmme District (1.6%) and the largest in Haabersti (11.9%), whereas the growth remained between 7% and 10% in most of the city districts. The change in the number of transactions reflects the changed market situation rather well – the bulky part of the market of new developments has shifted to the outskirts of the city, and the share of the Centre and Northern Tallinn has decreased. Thus, compared to the first five months of last year, the number of transactions in Lasnamäe and Mustamäe has increased by over 100, whereas the number of transactions in Northern Tallinn has decreased by 73 and in the Centre by 20.

In Tartu, the beginning of this year has been remarkably more active than last year – the completion of several new developments has increased the share of new developments and pushed up the figures. With 181 transactions, May was one of the most active ones in the past years, whereas the median price remained at the level of April. When comparing the first five months of the year, of the remaining largest cities in Estonia, Tartu is the only one where the number of transactions increased (635→738), with the support of new developments, also the median price of transactions has increased remarkably (10.6%, 1,218→1,347 EUR/m2).

In Pärnu, May was moderately active, and remained slightly slower than April, both in regard to the number of transactions and the median price. Stability also characterises the first five months of the year, the number of transactions is virtually similar to that of last year, the market sentiment, however, is moderately optimistic, and the median price increased by 13.9% compared to the same period last year (1,058→1,205 EUR/m2).

Next to Tartu and Pärnu, the real estate market of Narva is still at a low point: even though the median price increased a little in comparison to April, only 30 transactions were concluded, which is the smallest number after June 2013. Regardless of the slight increase in the median price, over 50 transactions less than last year were concluded in the first five months.

As in May, Harju County was again the area boosting the activity of the real estate market, it is appropriate to look at the municipalities around Tallinn that (next to the capital) have gained most from the revival of the real estate market. The statistical profile of all these municipalities is rather similar: positive birth rate and net migration, low unemployment and high income, which has given real estate developers a green light to build new residential premises.

Also the real estate market of the above municipalities is somewhat peculiar: as people hold on to the purchased real estate for longer than average, as a rule, the aftermarket in valued locations is small and new apartments are purchased mostly from first-hand sale. For the above reason, the number of transactions has changed only after large new developments have been introduced to the market – thus, mostly it is possible to speak of a steady increase in the number of transactions during the past five years only for Rae and Saue municipalities.

The median price, however, has increased remarkably: in Viimsi municipality, within the past four years, the prices have increased in average by 4% a year; 8% per year in Rae municipality, 10.9% per year in Harku municipality, 16.3% per year in Saue municipality and 17.8% per year in Saku municipality. As the basis for comparison was lower in Saku and Saue, the quicker price increase is also logical; in Saku municipality, construction of new residential premises to such an extent is a completely new phenomenon since year 1991.

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