Eamets: Developers are cautious – the number of building permits issued for residential construction decreased in the first quarter year-on-year

Today, the statistics office released data on the issuance of building permits and usage permits in the first quarter of this year. If we assume that the beginning of the year was rather a wave of economic growth (before the Iran war), we could also expect that construction activity has also picked up. The number of issued building permits could indicate the planned activity of construction work – in other words, how large are the developers' plans to start building. Unfortunately, the picture that emerges from the data is not encouraging. 

I looked at residential construction and used square meters as the basis, because as previous data has shown, Estonia has begun building fewer residential units in number, but in terms of volume there are more square meters – in other words, square meter calculations give a more adequate picture of the overall situation.

In all of Estonia, 13.7% fewer building permits were issued in the first quarter of this year compared to the same period last year. This decrease is across all types of dwellings. If we look separately at detached houses, townhouses, and apartment buildings, there are small differences here. For example, in detached houses (single-family homes), the number of building permits has decreased by 5.4%, for townhouses as much as -73%, while for apartment buildings with 3-5 apartments, the number of building permits has increased by 32.6% and for buildings with 6-8 apartments there is growth of 17%. The calculation is still based on the planned square meter volume.

Looking at the counties, residential construction growth is being planned (i.e., the number of building permits has increased) in Hiiumaa, Järva, Rapla, Valga and Viljandi counties and in Tallinn city and Tartu city. In other counties, the numbers of building permits, accounting for construction volume, have decreased. 

We hope that all the planned constructions will indeed be completed and that the planned projects already have financing or will have it soon. The interest rate environment is likely to worsen significantly this year – in other words, the price of money will rise, which sooner or later will have a negative impact on construction activity.