The price difference between Tallinn and Püssi apartments is 51-fold

The price difference per square meter between apartments in Tallinn and lower-income regions has grown to a 51-fold difference. Estonia's cheapest apartments are located in cities in Ida-Virumaa, Valga, Kunda, and Tamsalu.

According to the Land Board's transaction statistics, the median price per square meter of apartments in Tallinn is 2827 euros and in Püssi 55 euros, meaning the price difference is over 51-fold. The capital's price level exceeds that of Kiviõli by 33 times, Kohtla-Järve by approximately 18 times, and Sillamäe by over 12 times. The difference with Valga, Kunda, and Tamsalu is approximately ten-fold, and with Narva seven-fold.

"The price gap reflects the deepening demographic divide between Tallinn and other Estonian regions over the last 20 years and significant economic differences. The population in these cities has declined sharply, wage levels are low, and there is a lot of old and partially vacant apartment stock," explained Urmas Uibomäe, managing director of the real estate portal Kinnisvara24.

The price gap has grown over time

While the median price per square meter of apartments in Tallinn has more than doubled over 20 years, in Narva it remains 28% below the 2006 level, and in Sillamäe approximately a third below. In other low-priced cities examined, the cost per square meter of apartments has increased. In Kohtla-Järve, the price has risen by a fifth, and in Kunda by 14%, while in Tamsalu it has more than tripled.

Over the last ten years, prices have grown fastest in Kunda and Tamsalu. However, this does not mean that their price level has approached Tallinn's at the same pace, remaining around a few hundred euros behind. In small towns, the median is also influenced by the small number of transactions and the condition of sold apartments.

A comparison of counties shows the same trend. The median price per square meter of apartments in Harju County is 11 times higher than in Ida-Viru County and 8.7 times higher than in Valga County.

Fewer residents means fewer buyers

The demographic and labor market gap between Harju County and Tallinn, and between Valga County and Ida-Viru County, has only widened over the years. According to Statistics Estonia, the population of Harju County increased by approximately 22%, while Ida-Viru County lost 28% and Valga County lost approximately a quarter of its population. Tallinn's population grew by 15%, while the populations of Narva, Kohtla-Järve, and Sillamäe decreased by a quarter to a third.

"If in 2006 the population of Harju County was three times larger than that of Ida-Viru County, it is now over five times larger. Twenty years ago, Tallinn was 5.9 times larger than Narva in terms of population, now it is nine times larger," said Uibomäe, characterizing the decline in the buyer base.

In addition, the median wage in Ida-Viru County is approximately 72% and in Valga County 70% of the Harju County level. Employment also lags behind Harju County in both counties. The unemployment rate in Ida-Viru County reached over 11% this year, while the Estonian average is 7.1%. "The region's wage level affects how much of a home loan a buyer can take. More uncertain labor market prospects lead both buyers and banks to weigh their decisions more carefully," added Uibomäe.

A cheap apartment may require more of your own money

A low purchase price does not always mean that buying or renovating a home is easy. In an area with low transaction activity, a bank may value the collateral lower than the purchase price or require a larger down payment. Low market value also makes it difficult to obtain a loan for renovation, as the investment may not be recouped in the apartment's selling price.

According to Uibomäe, a new apartment would generally be a better security for a bank, but a home costing 100,000 to 200,000 euros is beyond the means of many local residents. This is also why new developments are not emerging in these cities. Narva just completed its first new apartment building after the 1980s. Construction is not cheaper in Ida-Viru County, Valga, or Kunda than in Tallinn.

"This creates a self-reinforcing cycle. Weak demand lowers prices and liquidity, banks are more cautious in valuing collateral, and renovation and new development less often pay for themselves. The housing stock ages and the region finds it even harder to attract new residents," said Uibomäe.