2022 Real Estate Market Summary
According to real estate experts, 2022 was a turning point year during which both war and energy crisis shook the real estate markets, and the supply and demand structure that had remained stable for years began to change. The year is summarized by Rando Vanaveski, member of the board of Domus Kinnisvara, Andi Pleskovski, partner at RE Kinnisvara, Risto Vähi, analyst at Uus Maa Kinnisvarabüroo, and Urmas Uibomäe, CEO of Kinnisvara24.
Over the last 12 months, there have been several market-affecting turbulences – the main keywords being the Ukrainian war, which affected the real estate and construction sectors as a chain reaction, as well as the energy crisis. "Supply chains that were recovering from the coronavirus crisis took another hit this year, which is why prices for certain construction materials rose to astronomical heights or were completely unavailable, and we had to find new markets to source materials from," said Andi Pleskovski, partner at RE Kinnisvara.
For the first time in over ten years, the number of real estate objects for sale fell at the beginning of 2022 – in January, the number of apartments for sale in Harju County was more than twice lower than, for example, three years ago and more than four times lower than in 2008. "Since January, however, the situation has changed and the number of sales offerings has grown every month again. In the Harju County apartment market, there is now twice as wide a selection as at the beginning of the year," explained Rando Vanaveski, member of the board of Domus Kinnisvara.
According to Urmas Uibomäe, CEO of Kinnisvara24, the growth in the number of sales offerings is also reflected in the portal's statistics. "The number of all listings has grown by a fifth compared to the previous year. The most additions as advertisers have been private real estate owners, who are this year over 20 percent more than the previous year," he added. "Among real estate objects, the share of house parts and apartments has increased the most."
During the spring-summer period, several builders faced a situation where it was almost impossible to quote a construction price to the client. It was also not possible to set rental prices for new buildings. According to experts with long experience in the market, such a situation has never occurred before.
In spring, the market responded quickly to find a solution for accommodating war refugees who had come to Estonia. Through a real estate portal created in cooperation between Kinnisvara24 and the Social Insurance Board, specifically designed for Ukrainian war refugees, more than 700 refugees found homes within the first two months. "The portal remains active – currently there are 137 active rental listings available across Estonia, 39 of which are free," pointed out Uibomäe.
The local construction market was also affected by Ukrainian labor that migrated here and returned to its homeland. "Many men returned home in spring for national defense purposes, creating a new problem for builders because there were no more workers to hire," added Pleskovski.
While the first war shock temporarily put the brakes on deals, what followed was a rapid market activation and continued price increases. "This lasted only a few months. In autumn, the energy crisis, rapidly rising euribor and inflation took confidence away from people. Economic growth slowed down and the number of real estate transactions decreased sharply, which in turn negatively affected the new development market," added Risto Vähi, analyst at Uus Maa Kinnisvarabüroo.
In contrast, Vähi highlights the rental market, which actually became sharply activated due to the refugee wave. "There has never been such pressure on the rental market in Estonia before," added Vähi.
In addition to private consumers, rapidly rising energy prices also dealt a painful blow to companies whose total costs include a significant share of energy consumption. In 2023, a record low number of new commercial spaces will be completed. "The volume is comparable to 2021 after the coronavirus crisis, when the least amount of square meters of new commercial space was brought to the market in the last six years," added Pleskovski.
According to Vanaveski, the 2022 market is characterized by the replacement of FOMO (Fear Of Missing Out) with FOBO (Fear Of Better Options), or fear that perhaps there is a better offer somewhere. "This in turn means that sales are successful for those who are technically better at selling and more consistent, and increasingly professional help from one's field, i.e., brokers, is being asked to help with sales," added Vanaveski.
