Andree Raid: Real Estate Market Needs Stability
The major and sudden changes in Tallinn's residential property market have been left in the past for some time, and ahead lies a period of stability and calm market movements. This means that we will not see significant or rapid changes in the near future that would affect the number or prices of residential property transactions. This is good, because the market needs sustainable trends with a more reasonable pace and better predictability instead of a quick rally.
Rental investors are making a comeback
In autumn 2022, rental investors disappeared from the buying side of the apartment market, as expectations of price decline were dominant. Acquiring depreciating assets is not a very sensible activity. Now rental investors are quietly turning their attention back to apartments, as the price bottom seems to be either here or coming very soon. The rental market has taken another long step forward in expansion over the past year, and this is fertilizer for the work of rental investors.
Rental investors must, however, accept lower yields, at least in the short term. Yields are eroded by the soaring euribor rate. The expected euribor decline from autumn to winter requires that these somewhat difficult times be endured with gritted teeth. Then loan servicing will become easier again.
Interest rates will still rise
The rise in interest rates does not pass untouched by homebuyers either. For homebuyers, the rise in interest rates that has occurred also makes loan repayment more expensive. This means that a certain number of people can no longer afford to buy a home, because their income remains too low. Tax increases also take their share on top of that. A smaller number of potential buying customers in the residential property market means that you should not expect rapid growth in transaction numbers or prices.
A rise in prices is not ruled out, but price increases or decreases cannot be uniform in the residential property market. The peculiarity of real estate booms is that they equalize the prices of different assets to be too similar. Lower transaction activity and clients making purchasing decisions more carefully create a situation again where detailed price differences that have disappeared over time between different real estate segments, regions, and quality classes reappear.
The worst is over
In summary, it can be said that brighter spring sunshine is peeking through the clouds of worry in the residential property market. Storm clouds, however, have not completely dispersed, as Russia's war in Ukraine alone could bring major world-changing surprises at any moment. Hoping for the return of economic growth, increased confidence, and interest rates moving downward after reaching their peak, one can predict that real estate brokers will continue to have their hands full with work, as the period of the lowest transaction numbers has been left in the past.
