Eamets: Housing Market Awakens and Price Increases Expected Next Year

The housing price index published by Statistics Estonia today fell 0.5 percent in the third quarter compared to the second quarter, but compared to the third quarter of 2023, the index has risen 6.4 percent.

Looking at changes in different regions, there was a 1% decline around Tallinn, while prices in Tallinn itself rose 0.9%. These are relatively small changes. True – a larger price decline was seen in the rest of Estonia. Actually, one could argue that housing prices have not fallen significantly on the real estate market. The reason is very simple: significantly more second-hand apartments are being sold today, and naturally second-hand apartment prices are on average lower than new development prices. Therefore, the overall price index in the capital, for example, has not changed significantly. The rapid decline in Euribor has invigorated the housing market and more broadly the entire real estate market. This invigoration will continue next year as well, which of course also means that real estate prices will start to rise as more transactions are made.

Today's relatively poor state of the European economy suggests that the Euribor rate cut will come faster than previously thought, meaning that as early as next summer, Euribor could settle around the 1.9% mark. Previously, it was thought this would only happen at the end of next year. This is certainly good news for all borrowers and undoubtedly bad news for banks, whose income is falling rapidly.