[LT]News Content

  • Rodyti archyvą
Grįžti į naujienų sąrašą

Estonian Real Estate Market: Zero Is a Starting Point for a New Countdown

01.04.10 / 14:21 / peržiūros: 12
Due to several factors, among which: the small country’s size, dependency on the Nordic and German exports markets, as well as the role of Nordic banks in its economy, Estonia follows the trends of Western Europe faster, compared to the other countries is the region. This is the reason why any market motion in this country attracts the attention of its closer and farther neighbors in Central and Eastern Europe. After a long-lasting lack of breaking news, on March 5, the Estonian President Toomas Hendrik Ilves broke the silence: “Figuratively speaking, we are having a zero-year but not in the sense that history would start from scratch.” Addressing Estonian Employers Confederation’s economic forum, he explained: “It is a time for choices on which direction and how to proceed further,” according to LETA. The end of 2009 marked a turning point on the Estonian real estate market – the number of apartment transactions has begun to increase and the investors started getting back to the market. Some examples follow. Regardless of the crisis, the developer Helios Süda Maja AS has launched preparations for a 85-hectares logistics park near Tallinn, of an estimated cost more than 4 billion EEK (EUR 255,591,054) The Ameerikanurga logistics park construction will start in Q1 this year and the first stage will be completed in about year. According to company’s manager Veiko Murruste, “if being realistic, it will take ten years to fully complete it.” The Ameerikanurga logistics park will be 12 km from central Tallinn, and will offer commercial space of over 110,000 m2 and logistics space 185,000 m2. A plan for the further development of the Ülemiste business city has been finally drawn so that the area will soon be able to meet brighter future and greater success The Ülemiste City business quarter in the outskirts of Tallinn will create together with Finnish bourse-listed company Technopolis Plc a joint venture Technopolis Ülemiste AS, that will start developing the grand project, according to “Postimees” daily newspaper (March 30). Arco Vara, a major Estonian real estate developer, announced that its loss in 2009 amounted to 324.4 million EEKs (EUR 20.7 million), which 72.0% less than the year before. Yet, only 82 apartments or plots were sold in Arco Vara projects, compared to 98 in 2008. Significantly, 41 of them went out in Q4, showing the revival of the market in the end of the year. Nordic banks, the sole players on the financial market show, also start showing sign they expect better times, although with well-understood cautiousness. Ero Viik, head of Swedbank’s real estate department, announced on a real estate conference (March 9) “Although the market expects the sales volumes to stabilize, no surge is to be expected in near future.” He stated, however, that the predominant opinion on the market is that the prices will no longer be falling. Viik emphasized that the developers will have to answer the requirement of a new type of buyers, who are much more price-sensitive and quality-demanding if compared to those of the property boom years. Good location, rational floor-planning, as well as energy sustainability are also among the factors defining the success of a future project (Estonian Free Press). Swedbank’s forecasts for 2010 are even more optimistic than those of the Estonian Government. The March forecast revision of the Ministry of Finance predicted that the current year will still show minus on Estonian economy, with a likely decline of 0.1%. On its side, the Swedish bank expectations are for a growth of 1.5% by the end of the year. Janne Saarikko, vice president of Sampo life insurance company in Finland, advised the Estonians for more conservatism and prudence. “It is important, that nothing is certain in the finance markets and everything can happen,” Saarikko emphasized. “Even whilst the probability of devaluating is small in Estonia, it is a possibility, which might come true, as we know from the experience of Finland from the beginning of 1990s.” The Estonian State also intends to put on the shelf 3,000 properties it owns and “doesn’t need,” as Prime minister Andrus Ansip told on a press conference in mid February. “These objects dilapidate in time, their state does not improve,” Ansip explained. Minister of Finances Jürgen Ligi confirmed that the plan is to consolidate all state-owned property in the hands of the State Real Estate Company (SREC). “It is complicated and includes exceptions, for example real estate reconnected to security is one of the exceptions,” he said according to Estonian Free Press. In 2009 the residential market was mostly driven by rental deals. Estonia has over 94,000 unemployed people with an unemployment rate 14.6% – the third largest in the European Union. Thus, to rent is the only solution for a vast portion of the population. Buying a property was affordable mainly for those independent from a bank mortgage. They were the movers and shakers in the sales sector. But the choice of quality-built real estate on good location also got limited, as the sellers had withdrawn their offers due to the bottom price levels. The very end of the year a new wind started blowing. As Mika Sucksdorff, CEO, Uus Maa Kinnisvarabüroo, put it: "Prices are down 50 to 60% and people who have been putting off purchasing decision made it at the end of 2009. They understand that prices will not fall further notably and have to make the decision now.” The analytical tool of City24 - SPOT also shows that the RE has reached the bottom and the curve is on a rise again. The average apartment offered price in Tallinn, for instance, moved from a peak of 23,765 EEK/m2 (EUR 1,519) onn January 1 2009 down to 19,051 EEK/m2 (EUR 1,217) on December 1 2009. But from the beginning of this present year the trend is up again with 19,683 EEK/m2 (EUR 1,258). It is for first time since the start of the downfall back in May 2007 that a price increase takes place. Brokers point out yet another sign of stabilization – the gap between offered and actual deal prices melts down, and not as slowly as the 5-month cover of snow here. Back in October 2009, the offers were “41 percent higher than the real prices of deals” according to Peep Sooman, member of the board of Pindi Real Estate. During the last several years, Estonia has kept a very strict fiscal control in its budget and fought to maintain the budget deficit below 3%. Now, it seems almost certain that the country will adopt the Euro in January 2011. The European Parliament (EP) has already nominated its Maltese EP member, Edward Scicluna, as rapporteur on the process. This major step will have a significant impact on the overall economy of Estonia and on the property market, in particular. The expectations are that a number of overseas buyers will be more willing to invest money in Estonia’s property market during 2010, just before the Euro rises the prices up. “If we look at the economic forecasts about Estonia now, their average – both in regard to economic growth and price growth – is largely taken zero,” in the words of the President Ilves (March 5). His statement finds its support with the business community. According to National Broadcasting, a poll conducted by the Estonian Employers Confederation in January showed that 39.7% of the respondents think that the situation will stay the same, as 21.4% think that it will deteriorate only “somewhat”. Ground Zero, besides its destructive military connotation, has also a meaning of “center of rapid or intense development or change”, and is a good start for a new countdown. On Sunday, March 28, the clocks moved only one hour forward. And despite there is snow here and there, the term in use is “Summer Time”. People like complaining, but would rather prefer to be optimistic.

Philip P. Philippoff

Grįžti į naujienų sąrašą

Latest news