Analyst: The Price Gap Between Tallinn and Nearby Municipalities Has Widened Unexpectedly Large
According to Sten Renar Subatšjus, the head analyst at Estonia's largest real estate office Uus Maa, a new 3-room apartment in Tallinn's city center and a decent house in the capital's surrounding areas have reached the same price range, which is why families are increasingly moving to nearby municipalities.
"The normality of large Western cities has reached Tallinn – essentially, a new city center apartment has become a luxury item. If a square meter of an apartment in Tallinn's new developments cost an average of 4,600 euros in September, then transactions in nearby municipalities were made at 3,500 euros, meaning the difference has grown to nearly a third. In monetary terms, this means that a new three-room apartment in Rae municipality costs 250,000, while in Tallinn at the same time it costs nearly 100,000 euros more, and this is already a very large difference for a buyer. As a result, the sale of new apartments in the capital is currently struggling, but the situation is much better in nearby municipalities," said Subatšjus.
"The especially large difference comes with larger family apartments. Within half an hour's drive or train ride from Tallinn, a new 150-square-meter house with a yard costs as much as a 3-room apartment in the city center. Such a large price difference between Tallinn and nearby municipalities has emerged in recent years – in the capital, the new development market is in the hands of 5-6 major developers who have sufficient resources for this and are able to keep prices up. Also, large apartments in the city center are simply hard to find because developers prefer to build 1-2-room apartments, which are easier to sell. In Tallinn's peripheral municipalities, families have a much wider selection," commented Subatšjus.
According to the Uus Maa analyst, outside the capital there is much more active and diverse development – competition is greater and development processing is also simpler and more favorable. "If the price of city apartments remains stable, then house prices in nearby municipalities have declined. Development is done according to demand, rather cheaper, simpler, but still entirely decent homes," said Subatšjus.
"Since the middle class can no longer afford to buy a large apartment in Tallinn, families are increasingly moving to the so-called golden ring of municipalities within a 40-kilometer radius of the capital. There is no great difference in quality of life – the city center of Tallinn is reachable in 15-30 minutes and infrastructure and basic services are also available locally. Due to increased demand in recent years, areas closer to Tallinn such as Laagri-Alliku, Peetri-Järveküla and Tabasalu-Tiskre have been filling up, so people are also looking a bit further – to Kose, Jõelähtme, and especially to Kiili," added Subatšjus.
