The Impact of Administrative Reform on Real Estate Value
Through administrative reform, Estonia went from 213 previous municipalities to 79 municipalities by the beginning of 2018 following mergers. According to the Ministry of Finance, after the administrative reform, municipalities with fewer than 5,000 residents decreased from the previous 169 to just 17. The average number of residents in one municipality has grown from 6,349 residents to 17,152 residents as a result of implementing the reform.
As a result of municipal mergers, such local municipalities have been assigned an address data change process. According to the Land Board, Estonia has approximately 1.2 million addresses, of which approximately 400,000 addresses are changing due to administrative reform, of which an estimated 200,000 are residential addresses. Additionally, in regions where addresses overlap, addresses must be changed to be distinguishable from one another. As a result, certain properties or even entire streets must be assigned new names, and naturally, many local residents are not pleased with these changes.
There are also regions where simply changing the last part of the address is not sufficient, but village names must be changed entirely, since one municipality cannot have multiple settlements with the same name. Village names changed significantly, especially in Saare and Võru counties. Address changes related to administrative reform are carried out based on the spatial data law; mass address changes began immediately after local government elections in October 2017. All individuals affected by address changes are notified individually and given the opportunity to express their opinion on the appropriateness of the address being changed. The compensation of costs associated with changing new street names or building numbers on buildings is a decision for each municipality individually; often the costs must be borne by property owners from their own resources.
Whereas previously in Estonia there have been situations where residents of new residential areas have not been satisfied with the street name chosen by the municipality and have been willing to pursue court disputes because of this, address data changes following administrative reform have been inherently accompanied by similar resident resistance. In this regard, people's attitude toward the emotional value of a region's former name is completely understandable, but in addition to that, there has been an increase in misconceptions about the impact of address changes on property value.
Property value is created primarily by economic, social, legal, and environmental factors. In this regard, an address as such does not fall under any of these value-affecting factors. Put simply, a property's value is determined primarily by its physical location, but the location itself and the property situated there does not inherently change as a result of implementing administrative reform. People buy property according to their consumption capacity, emotions, and needs. An address on a building wall or fence unfortunately does not affect regional supply and demand dynamics and thus does not influence price formation in any way. However, administrative reform does have an indirect impact on property value through increased sustainability of the municipality and thereby the infrastructure, which allows, for example, the improved opportunities to take children to daycare centers closer to the center than may have been possible previously.
Source: Arco Vara
