Expert: Rising Food Prices in Real Time Drive People to Buy Real Estate

According to Sten Renar Subatšjus, the analysis director of Estonia's largest real estate agency Uus Maa, people feel inflation most directly through the rising prices of everyday groceries, which is prompting buyers to finalize real estate transactions that had previously been postponed due to fears of continued price increases.

"It's somewhat paradoxical, but rising food prices are one of the factors motivating people to complete real estate transactions they had put on hold. In September, real estate market activity was noticeably higher than before, and while the main underlying reason remains more favorable lending terms and improved real estate accessibility, everyday consumer inflation plays a significant role in decision-making. The grocery basket is the most direct and immediate feedback for ordinary people about what's happening in the economy, and it also influences larger decisions," said Subatšjus.

"Those who were waiting for the so-called right moment for a long time have realized that real estate and other prices won't come down anymore and are now making their purchase decisions. Essentially, rising milk prices are motivating real estate purchases driven by concerns about continued inflation," Subatšjus said.

According to the Uus Maa analysis director, it is still currently a buyer's market – there is sufficient selection and sellers need to make concessions to complete a transaction, but the room for negotiation has diminished. "Half a year ago, the gap between real estate asking prices and transaction prices was sometimes 10% – 15%, but now it has come down to 5% – 10%," said Subatšjus.

"The gap between asking prices and transaction prices is currently larger in Tallinn's new developments – the average price per square meter in sales listings was 5,019 euros in September, but transactions were completed at 4,600 euros. Meanwhile, for example, the asking and transaction price difference for new apartments in Tallinn's immediate surroundings was only 30 euros per square meter. For the past couple of years, it has also become typical that a new apartment comes with something included – a storage unit, parking space, or a new kitchen, which would otherwise mean an additional cost of 10,000-15,000 euros," added Subatšjus.