VAT Rising from July Boosted New Development Sales Sharply
Sales of new apartments in Tallinn grew over 20% in May, with the main reason being the increase in value added tax effective from July 1st, according to an analysis of real estate transactions by Uus Maa, Estonia's largest real estate agency.
According to Sten Renar Subatšjus, head of the analysis department at Uus Maa Real Estate Agency, 1,836 apartment purchase and sale transactions were made in Estonia in May, which is the highest result of this year. "In addition to the higher number of transactions, the median price of real estate transactions across Estonia also increased by four percent compared to last year. The market has grown compared to a year ago despite various tax increases and low consumer confidence. Rising transaction volumes with real estate in popular holiday areas also contributed to market growth – for example, the number of transactions in Pärnu County increased by over 40 percent month-on-month," said Subatšjus.
"Most notably, new apartment transactions in Tallinn grew by 20 percent compared to April and 40 percent compared to the same period last year, which is mainly due to the value added tax increase taking effect on July 1st. People want to sign contracts before that happens, and therefore more transactions than average are expected in June as well. The longer-term impact of the tax increase can only be assessed in the second half of the year," said Subatšjus.
Across Estonia, the apartment market turnover increased by 7.9% compared to May last year, while single-family home turnover remained at the same level. Compared to the previous year, in the first five months of this year, the number of apartment transactions increased by 7.8%, median price by 6.8%, and transaction turnover by 14.8%.
In Tallinn, the median price of real estate transactions declined by 5% compared to April and by 7% compared to May last year, but the number of transactions increased by five compared to April and by nearly 20% compared to the same period last year. According to preliminary data, 770 transactions were concluded in April with a median price of 2,734 €/m².
Tartu's April activity is balanced by May's number of transactions, which declined by 9% month-on-month and by more than 14% compared to a year ago. A total of 131 transactions were concluded in Tartu in May with a median price of 2,354 €/m². "Compared to last year, the median price is still below average, but since the beginning of this year, a rather upward trend is visible," commented Subatšjus.
Pärnu's real estate market gained momentum again in May – 79 transactions were concluded, steering the course back toward growth. Compared to April, 23 more transactions were made (41%), and the median price was 2,375 €/m², showing the best result of the last 1.5 years. Compared to the same period last year, the number of transactions increased by only six, but the median price of transactions rose by over 20%. "Based on these numbers, one could predict that holiday-makers are expecting beautiful summer weather this year," noted Subatšjus.
Narva's real estate market was stable in May. The number of transactions in May fell short of April by two, and overall activity is rather low, but the median price of transactions increased by 6% compared to the previous month. "Compared to last year, the figures are still strongly negative – the number of transactions is nearly 19% lower and the median price is approximately 15% lower. The acceptance of the actual situation is also reflected by asking prices falling from month to month, still being over half higher than actual transaction prices," added Subatšjus.
