Expert: Cheap Apartment Prices Are Stable, Negotiations Getting Tough on Average Properties

According to Risto Vähi, an analyst at Estonia's largest real estate agency Uus Maa, the expectations of buyers and sellers have begun to converge, and while cheaper apartments are even experiencing overbidding, the most difficult situation is with mid-range apartments, which often see very active price negotiations.

According to Risto Vähi, price is currently the most important factor in negotiations – if the seller is somewhat flexible, then a deal can be made. "In March and April, the statistics for viewing listings grew significantly, but relatively few deals were made. In May and also June, this interest has already turned into actual transactions and overall activity has noticeably increased. If the pricing is right, then the buyer and seller will reach an agreement," said Vähi.

"There are major differences on the demand side depending on what is being sold. There is great interest in the cheaper end – apartments with a price per square meter of 1900–2600 euros. With these, there have already been overbids and there is little hope of negotiating the price down," said Vähi.

"Likewise, even with the most expensive apartments, the price is not significantly reduced – with these, other factors are decisive such as uniqueness or emotion, and whoever wants the property will pay the asked price. This year, several notable million-euro deals have been made with such apartments," said Vähi.

"The most difficult negotiations are with mid-range apartments and this segment has also seen the largest price drops – even 25-30% from the peak. A mid-range apartment means a property in average condition where you can live, but in reality renovations should be done. In this segment, the main bottleneck is the parties' differing views of the property's condition and value. For the seller, an apartment renovated 10 years ago is almost like new or close to it, but for the buyer clearly not, and additional investments would need to be made. There are quite a lot of such properties that are mediocre in every respect on the market and the deal depends directly on the seller's price flexibility," said Uus Maa's analyst.

"The condition of the building is also important – whether it has been recently renovated or is starting to show age. You could say that a property needing renovation in a renovated building is generally preferred over a renovated apartment in a building in poor condition. If you can get a decent apartment in a well-maintained building, then of course that's the best," added Vähi.

According to Risto Vähi, 30% fewer apartment deals were made in Tallinn in May this year compared to last year, and behind this is the deterioration of lending conditions and a decline in new development sales. "Several new developments have also recently been completed and since some existing investors are also trying to convert their property into cash, competition is growing. People sense that the gap between the prices of older apartments and new developments is still too large. If some developer officially reduced their price by 10-15% from the current level, it would clearly create an advantage over the others," added Vähi.