Kristjan-Thor Vähi: Two Major Real Estate Problems Have One Common Solution

Against two major problems of the Tallinn real estate market - high prices of new homes and declining demand for office space - there is a working solution if the city government would allow empty old office buildings to be converted into residential properties at an accelerated pace, suggests Invego's head Kristjan-Thor Vähi.

According to Invego's head, there is a very clearly felt problem that many young families today cannot afford a brand new home financially. "The concern is even more serious because new homes are actually becoming even more expensive. This trend is inevitable, because all input prices around us have already risen with inflation over the past few years and will continue to rise," explains Kristjan-Thor Vähi.

One of Estonia's largest real estate developers proposes that Tallinn's new city government could encourage a simplified process for converting old business buildings into residential ones. "At today's prices, newly renovated homes converted in this way should cost around 2,500 euros per square meter, depending on location and other details," believes Invego's head.

According to the developer, demand for office space has been declining since the pandemic and the market is clearly experiencing oversupply. "The question is a matter of time - if we start moving according to previous practices in the rhythm of detailed planning change processes, then some old office buildings will eventually turn into abandoned buildings and this in turn will clearly lower the prospects of the surrounding area," emphasizes Vähi and adds also the environmental argument of giving new life to an old building instead of demolition.

According to Kristjan-Thor Vähi, similar choices are being made in many places around the world today, because urbanization continues and there is no sign of a massive return from home offices. "The problem of accessibility to residential real estate is serious in many major cities and at the same time many places have a fair amount of vacant office space. Those cities where such conversion of offices into living spaces succeeds smoothly will develop faster and will certainly gain an advantage in attracting new quality workforce," ponders Vähi.

Brand new homes will remain somewhat more expensive, according to Vähi, although here too price increases can be kept under control for some time. "Once again we look to the local government - the faster all necessary processes are handled, the lower the final price for the home buyer," emphasizes Invego's head and recalls that in Latvia's capital Riga it is primarily for this reason that today it is possible to buy a new home comparable to Tallinn at around 30% cheaper price.