Real Estate Supply Beginning to Dry Up
Real Estate Supply Is Starting to Dry Up
A ghost is walking across the real estate market. And it is the ghost of declining real estate supply, a trend that helps maintain prices and does not give buyers much room to negotiate.
Äripäev conducted a journalistic experiment this year by calling through sellers of new developments in Tallinn and, to its surprise, ran into a solid brick wall when asking for discounts. While in the spring of the coronavirus, it was still possible to negotiate significant discounts from some frightened developers, those days of large discount offers are now over. Campaigns and special offers are being made today as well, but that is part of normal business.
The state of emergency established in March created hope for a while that now, after many years, the day for real estate buyers had come, but it soon became clear that developers would stick to their business plans and sales prices. The main reason is the developers' good capitalization and their sufficient confidence in the strength and sales success of their development projects.
This confidence was supported by the fact that the health crisis did create enough uncertainty in the real estate and construction sector, and it became clear that the entry of completely new projects to the market would be delayed, especially by small developers. Supply became increasingly smaller, so projects already on the market gained a certain advantage. The second half of summer and autumn have brought news of new projects, but the previous pace has far from been regained.
The impact of new developments on real estate market statistics is indeed significant, but in fact, the number of objects has also declined in the secondary market. If we look at the entire market and the supply on real estate portals, we see that the number of listings has decreased almost everywhere, with only the real estate portal Kinnisvara24 having managed to increase its volume in October compared to January. The number of listings on the KV.ee portal, on the other hand, has decreased by about 5.5% compared to the beginning of the year. There is also a part played by the fact that competition has emerged in the real estate portals' own market, and so both private individuals and real estate agencies choose more carefully which portal to advertise their property on. But this is not the whole truth when assessing the real estate market. Rather, it must be acknowledged that demand has remained surprisingly stable throughout the year, but supply has decreased in both new developments and the secondary market.
For example, in the town of Haapsalu, the number of apartments on offer has already fallen below 50 units. Apartments in panel buildings have not experienced such price growth as in new developments, but apparently such a reasonable price level is the reason why the number of transactions in the capital has even grown by nearly a fifth compared to last year.
Perhaps the problem in real estate sales today is not sales itself, but the problem is becoming the fact that supply is decreasing and it can be predicted that this trend will continue at least through the coming winter season. Surely many a real estate owner has put thoughts of moving on a shelf, waiting for times when there is more clarity about the future than today can offer. But if a certain part of sellers remains on standby, then buyers' choices will decrease even further, and it is not worth deceiving oneself with hopes for prices to fall.
Source: Raul Reino Board Member Domus Real Estate
