Should You Invest?
There is no doubt that Estonia is tightening its belt and
preparing for some harder times. On the first of April the Finance
Minister cut the 2008 growth forecast from 5.2% to 3.7%, predicting
almost a halving of growth from last year's 7.1%. Rising inflation
rates have subdued the spending potential of the country along with
restricted lending from the banks, an effect of the global credit
crunch. Prognosis for next year is better, though, with the 2009
forecast increased to 6.4%, up from 6.1%. Currently, Estonia is not
the place for short term investments although with signs that
the economy may be starting to improve, it should recover its
investment potential at some point in the future.
- High inflation rates.
- Rocketing house prices outpacing rents = low yields.
- Very low transaction costs.
- Predicted conversion to the euro in 2012 should herald a more
stable economy.
- Mortgages available for foreign buyers.
Rental Yields
In the current climate predictions for potential yields in 2008
are difficult to find, most probably because no one is in a place
where they can make such predictions. Once prices have stabilized
and the market regained healthy interest then forecasts can start
being made.
location
type of
property |
size
(m2) |
average
price
to buy
(€) |
cost per
m2 to buy
(€) |
average
price
to rent
(€) |
cost per
m2 to rent
(€) |
yield
(%) |
Tallinn - City Centre-
Apartments |
|
|
|
|
|
|
| |
30 |
66,000 |
2,200 |
350 |
11.7 |
6.36% |
| |
50 |
134,000 |
2,680 |
550 |
11 |
4.93% |
| |
75 |
188,000 |
2,513 |
830 |
11.1 |
5.28% |
| |
100 |
250,000 |
2,500 |
1,200 |
12 |
5.76% |
| |
150 |
340,000 |
2,267 |
1,850 |
12.3 |
6.53% |
Tallinn - Suburbs -
Apartments |
|
|
|
|
|
|
| |
30 |
52,000 |
1,733 |
- |
- |
- |
| |
50 |
80,000 |
1,600 |
- |
- |
- |
| |
75 |
143,000 |
1,907 |
- |
- |
- |
| |
100 |
340,000 |
3,400 |
- |
- |
- |
Tallinn - Suburbs -
Houses with
grounds |
|
|
|
|
|
|
| |
150+ |
215,000 |
1,433 |
- |
- |
- |
| |
250+ |
266,000 |
1,064 |
- |
- |
- |
| |
400+ |
490,000 |
1,225 |
- |
- |
- |
Source: Global
Property Guide
Price History
According to the Knight Frank Global House Price Index for the
third quarter of 2007 the growth rate for Estonia, using Tallinn as
a guide, fell from 16% to 5.2%. As a whole the country has
seen year-on-year price inflation fall dramatically. Whilst
central, Old Town properties are remaining quite stable in terms of
price, the apartment market is suffering, having witnessed the
greatest decline in asking prices.
Rental values have been increasing in Tallinn as demand is still
strong; however, this could be in part due to the locals who have
been priced out of the buying market and forced into the rental
market.
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