Expert: Real Estate Price Floor is Near

According to Jaanus Laugus, the head of Estonia's largest real estate office Uus Maa, prices for old apartments have fallen 20-30% from their peak, and buyers now have the opportunity to dictate their own terms.

According to Jaanus Laugus, buyers currently determine the market and sellers are flexible. "With statistical precision, this will only become clear in the future, but the bottom of the second-hand apartment market appears to be near or likely already here. Price is now the most important factor, and apartments in buildings under ten years old in the price range of 3000-4000 euros per square meter find buyers quickly. In this price range, there are often more interested buyers and we even see cases of bidding wars," said Laugus.

"At the same time, there is low market interest in some assets. It has become clearer which streets and buildings in different areas are more popular and which are less attractive. Since there are many listings, good marketing matters more than before for standing out," said Laugus.

"There has been essentially no price decrease in new developments. There is clearly buyer interest in new developments in Tallinn and its surrounding areas under 4000 euros per square meter. Developers have decided to wait until inflation does its work and the market catches up, and we likely won't see a major price drop in this segment. Rather, the price level of Tallinn's new developments going forward will be above 4000 euros per square meter," said Laugus.

"The future direction of the real estate market depends on loan interest rates. There is a direct relationship between loan prices and real estate market activity. Currently, taking out a loan is the most expensive it has been in years, which reduces affordability. However, banks are not forecasting a further increase in interest rates, and when loan prices start to fall, buying interest will rise and the market will turn in the other direction. A home is purchased with a 20-30 year perspective, and during that time interest rates go up and down, but compared to historical averages, real estate prices are trending upward," said Laugus.

"Purchase decisions have been postponed for a long time and the number of views on real estate listings is at higher levels compared to a year ago. Also, there don't appear to be other factors that increase uncertainty, such as those arising from high energy prices, which have clearly affected the market so far," commented the head of Uus Maa.