Average Family Can Afford a 60-Square-Meter Apartment

According to Igor Habal, a member of the board of Estonia's largest real estate agency, real estate prices have fallen by 9.5% over the past two years, and the average Tallinn household can afford approximately 60 square meters of living space.

According to Igor Habal, real estate has become more affordable, but may not return to pre-pandemic levels anytime soon. "In Tallinn, real estate prices have remained at the same level for two years, in some cases even declining from the 2022 peak. If real estate prices do not rise significantly in conditions of high inflation, i.e., money devaluation, this means an improvement in the real price and affordability of housing. On the other hand, high inflation is a double-edged sword – people's overall costs increase, and countries also try to keep price increases under control and may therefore not reduce Euribor loan interest rates fast enough," said Habal.

"For the summer, the six-month Euribor is still expected to fall to 2.2%, which is 0.3 percentage points lower than the current level, with prospects to fall to 2% by year-end. The pace of loan interest rate decline depends greatly on whether inflation can be controlled, and this in turn affects the affordability and cost of real estate," said Habal.

"Given that real estate prices have not risen for a long time against the backdrop of cost of living, and general economic indicators are improving, we can expect a 3-5 percent price increase in the real estate sector this year," Habal predicted.

According to Uus Maa board member, there are currently 4,400 active apartment sale listings in Tallinn, which is 20% more compared to the same time last year. "At the same time, the market is more active and in recent months the number of listings has begun to decrease. The inventory of new apartments has also declined slightly – owners are waiting for 2,600 new apartments, which is approximately a two-year supply. Meanwhile, the average offering price per square meter of an apartment has gradually increased, reaching 3,500 euros, which reflects positive market expectations. It is possible that this year the seller's market will emerge again from the buyer's market," said Habal.

"This year, the real estate market will also be affected by tax increases – mainly increasing indirectly consumer uncertainty. Since the inventory of new apartments is quite large, most developers will rather not immediately add VAT to the apartment price, but will try to remain competitive. The same happened with the previous VAT increase – some developers added the tax to the apartment price immediately, but most covered it from their own profit," added Habal.