Rising Tax Hikes and Falling Euribor Behind Real Estate Market Activity
The real estate market has gained momentum that hasn't been seen in quite some time. This is due to the falling euribor and anticipated tax increases, comments ELUM Kinnisvara broker Margo Merigan.
"Estonian people have started buying more real estate again, seeing the current situation as a good opportunity both for purchasing their own home and for investment," says Merigan. "Over the last six months, the six-month euribor has fallen significantly. In May of this year, this rate was 3.83%, but by November it had fallen to 2.735%. This means approximately a 1.1-percentage-point drop over half a year."
What does this mean for borrowers? For example, if the loan balance is 200,000 euros, the savings from such a decline would be approximately 702 euros over half a year. The savings for home loan borrowers depends on their loan size, remaining loan period, and individual contract.
"The falling euribor is not the only reason motivating people," explains Margo Merigan. "Many clients also point to the upcoming tax increases, which significantly affect real estate transactions. For example, the vehicle tax that takes effect at the beginning of 2025 and the VAT increase in July are factors that accelerate purchasing decisions."
According to her, particularly noteworthy is the VAT increase of two percentage points, which raises the prices of new developments. This means that concluding a real estate transaction before July 2025 could save buyers amounts equal to the price of an entire apartment interior.
"Home buyers' attention is currently directed more towards real estate with reasonable energy consumption and apartments in buildings that are in good condition or recently renovated. Energy ratings in the range of A-C and two- to three-room apartments are preferred. An apartment meeting the above-mentioned criteria will find a buyer quickly if the broker prices it fairly," says Merigan.
