Real Estate Market Beginning to Show Signs of Recovery, Says Eamets
A recently published summary by the Chamber of Notaries on real estate transactions in the third quarter shows that people are carefully monitoring what happens with interest rates. The number of real estate transactions has grown slightly compared to the third quarter of the previous year – the growth was 2%, which means 300 more transactions. However, over the nine-month period, there were still fewer transactions than in the previous year. Overall, the number of transactions has begun to rise gradually, month by month – at least in the capital.
I believe the increase will continue because next week the European Central Bank will most likely make the next interest rate cut. Traditionally, the step is 0.25 percentage points, which means that the six-month Euribor should stay within the 3% range, which he has already reached today with caution.
We can also expect a second interest rate cut in December, which means that Euribor should reach 2.8% by the turn of the year. This is certainly good news for both new and old real estate buyers, as loan costs decrease.
If supply is currently one of the largest in the real estate market ever, then falling interest rates will likely increase the number of transactions. Today, the biggest obstacle is consumer uncertainty about the future. We hope that the major festivals are now over and a calmer period awaits, where new taxes are not discussed every week. For people buying a home for themselves, it is also good news that it is not economically beneficial to buy an apartment for rental today, which means there are fewer competitors who could drive up the price. On the other hand, we must take into account that taxes will rise next year, which makes all transactions more expensive.
Currently, the so-called secondary market apartments dominate the market, that is, apartments that are going to a new cycle. New apartments clearly come with the risk that one must check whether something has actually been built or if only promises are being sold. Projects on paper can be beautiful, but one should make sure that the developer has the resources to complete things. Fortunately, there are no longer very small and random players on the market, because times have been difficult and smaller quick-profit seekers have already gone bankrupt. The developers who are working today are usually large players who are well capitalized and often engage in construction themselves – in other words, they have money. However, this does not mean that the background should not be carefully examined, especially if ideas are being sold instead of finished products.
Since there are many secondary market apartments on the market, transaction volumes are also smaller and the average price is somewhat lower, because a used apartment square meter usually costs less than a new development apartment. Of course, everything depends on the location and the general condition of the apartment.
Looking at the big picture, we must acknowledge that we are moving our residential market towards where developed countries are – the rental market is growing slowly but consistently. Since in the long term real estate prices follow general inflation and the rising cost of living, similar to the old European countries, we too will be in a situation years later where a person starting their working life simply does not have enough resources to buy an apartment. It can be assumed that in the capital, this time is already practically here. We have to settle for renting. This may not be a bad idea at the beginning of working life either, because people's plans change and renting makes people more mobile – it is easier to change living and working places, especially if it is not in the same city or country. We wanted life like in the Nordic countries – now we are gradually starting to get there.
