Expert: Investors May Soon Return to Real Estate Market

After several years in which investors have placed their money in other instruments rather than real estate, the market is approaching a balance point as Euribor declines, where real estate will again offer competitive returns, according to Martin Vahter, head of 1Partner Real Estate.

"Real estate is certainly above-average safe, but for a couple of years the cost of money has been too expensive and capital has clearly achieved better returns elsewhere. However, when the expected monthly rental income starts to exceed the loan payment amount, then investors' return is already highly likely," explains Vahter, noting that if the interest rate together with the bank's margin stays around 5.5% per year and the investor finances half of the property purchase price with a loan, then the expected rental income is able to cover the loan payment.

According to Martin Vahter, the numbers don't quite add up today, but in light of the continued decline in Euribor and the likely increase in both real estate and rental prices, the picture is changing. "In the long run, rental growth increases returns even if loan interest rates don't fall significantly anymore. Moreover, the change in property value over time also makes real estate investment attractive for even more conservative investors due to lower risks," explains Vahter, who believes that the time has come again when real estate investment will be seriously considered once more.

1Partner is the leading real estate group in the Baltic states with more than 20 years of experience, with offices in Tallinn, Tartu, Riga and Vilnius. The 1Partner group provides real estate brokerage, valuation, construction, development, management and investment management services. The 1Partner real estate group is the official partner of JLL (Jones Lang LaSalle), the world's largest commercial real estate consulting company, in the Baltics.