Forecast: House Prices to Rise at Least 5% Next Year
According to Igor Habal, a member of the management board of Estonia's largest real estate agency Uus Maa, the number of real estate transactions will increase by up to ten percent next year compared to the current year, and prices will rise by an average of 5%.
"The state of the global economy is unpredictable given wars, the USA's new president, and Europe's sluggish economic growth, but on the whole, the basic indicators are improving and next year appears to be more favorable than 2023 and 2024 were. There is great hope for continued decline in euribor, and there are more signs that the situation will improve than that it will remain the same or worsen. In the real estate sector, there is a widespread belief that we are at the beginning of a new economic growth phase," said Habal.
"In October-November, there was true euphoria on the Tallinn real estate market and transactions were being made at a pace similar to the boom years. However, increases in turnover and income tax, as well as the automobile tax, will dampen activity at the start of the year. In the second half of the year, the emotional impact of these measures should largely fade, and we should continue moving forward with transactions – compared to this year, a 5-10% increase in transaction volumes is expected for next year, which would bring activity to the level of 2022. This means that approximately 100-150 sales of new Tallinn apartments will be made per month, and 550-650 transactions with older apartments, which is the average level of the past ten years," said Habal.
"Although there is a lot of supply, we see a paradigm shift next year – buyers no longer dictate prices. At the same time, sellers must continue to be flexible. Along with general inflation, a 5-percent or even higher apartment price increase is expected for next year. In areas where the pricing of new apartments has been incorrect and the product does not match the location, developers need to make concessions. Some developers have tried to sell premium-level products in poorer locations and, for example, charge 500 euros per square meter higher than the surrounding market level, but they have essentially shot themselves in the foot with this," added Habal.
According to Igor Habal, uncertain times are favorable for the rental market. "Because people are still cautious about buying, this keeps the rental market active and offers owners the opportunity to raise prices slightly. The rental market can also expect an average 5-percent price increase next year," said Habal.
"If you compare buying your own home versus renting, then at least in major shopping centers, it remains more profitable in the long term to do the former, because the value of property and demand grow over time," added Habal.
