Eamets: Fallen Interest Rates and Rising Incomes Drive Housing Price Growth

Today, Statistics Estonia released second quarter data on the housing market. Over the year, housing prices have increased by 5.5%, and compared to the first quarter, housing has also become more expensive. The number of transactions has also increased. Price increases have occurred in Tallinn as well. The Tallinn housing market is characterized by a very high price level compared to the rest of Estonia, especially regarding new developments. The increase in transaction volume has been driven mainly by the secondary apartment market, that is, actively buying older apartments, which are more affordable.

The rise in housing prices could have been predicted already in spring, as a decline in interest rates was expected. Today, the European Central Bank's base rate has fallen by 4% to 2% over the year.

This has brought Euribor to the 2.1% level and made borrowing cheaper. The increased demand, in turn, brings about price increases. The relatively rapid wage growth, which is very likely to continue next year as well, also contributed to greater demand. Therefore, it is very rational to expect that real estate price growth will continue, especially in the secondary apartment market.