OPINION: The real estate market will recover only when conditions for it are met

The Estonian real estate market will recover when the economy and residents' confidence do. Constant forecasting and speculation create more confusion, comments ELUM Kinnisvara broker Egon Juhanson.

"People keep asking when the market will start growing. History shows that forecasting is very difficult work and you constantly have to correct your opinion," says Juhanson. "We see the bottom or the peak only in hindsight. Everything must go through a natural process."

However, we can highlight some aspects that affect how people act in the current market situation and which might have some greater impact in the more distant future.

"The much-discussed decline in euribor will have an effect when it is actually reflected in a person's monthly payment," explains Juhanson. "For example, if a person's monthly payment increased by 200 euros compared to zero euribor and they now get a 100 euro smaller payment as it declines, that is already a reason that could more likely drive someone to buy."

Regarding the impact of new tax increases on the real estate market, Juhanson is rather skeptical, as overall consumer confidence is already low and against a backdrop of continuous price increases it is no longer as noticeable. "Actually, everyone is waiting for the economy to start growing again and people to dare to make bigger decisions. On the real estate market, this happens with a lag – only when we actually see that things are improving in the bigger picture will the real estate market start to recover," he says.

There are other reasons for the market slowdown besides people's uncertainty. "When the real estate market was at its peak of activity, every property in every location sold well, but now the wheat has been separated from the chaff. This is especially noticeable in Tallinn city center and its immediate surroundings, but also in Pärnu," says Egon Juhanson. "Much has been said about oversupply, but in reality there is still rather a shortage of quality products (location, content). There is plenty of average property, but many do not want it and price drops can be expected from there."

In summary, we need economic growth and a restoration of confidence. "Only then will the real estate market also start to recover. Before that, there is no point in making any major predictions, because you will most likely have to go back and revise your forecast," says Egon Juhanson.