When Will the 2000 €/m2 Price Threshold Be Exceeded in Tallinn?
According to the Land Board's transaction data, a square meter of an apartment in Tallinn cost an average of 1948 euros in May, which is about 4% higher than in April, while the average median price remained at 1813 eur/m2. The fact of price increases should no longer be news to anyone, but based on the last decade or so, it no longer seems to be a question whether apartment prices will exceed the magical 2000 €/m2 threshold, but rather when this will happen.
If someone had the money or courage or cleverness in 2009, or even better, all of these qualities combined, then this person has handsomely recouped their investment in Tallinn real estate. In 2009, the average price of apartments in Tallinn was 871 €/m2 (median price 779 €/m2), and since then prices have risen annually, some years proportionally more, some years less. Prices in Tallinn have risen by more than 1000 €/m2 over ten years, with growth more than doubling. The numbers have been impressive, which is well illustrated by the following table:
To better understand the extraordinariness of the 2000 €/m2 price level, one must go back to 2015-2016, when the price level had risen to 1500-1600 €/m2. This was a time when talk of a new real estate boom intensified, and the media asked after each quarter whether the price ceiling had now been reached and when the price rally would stop. Most people outside the real estate sector became somewhat worried, and many also believed that the market would make a downward correction, yet continued buying anyway, because one has to live somewhere and solid wage growth eased worries. Few believed talk that the situation was different compared to the previous boom, because most remembered how the predictions of real estate agents fell flat in 2007-2008. But now we are finishing the second quarter of 2019, prices are at their all-time highest level, the market itself remains stable and calm, and it almost seems that now perhaps this is the normal situation for everyone. There is no crisis, there is no boom, there is an entirely ordinary market named after Adam Smith that regulates itself. Some project sells very well, another moderately, a third development project has a long sales period, and some project fails – as is customary in a market economy.
Old folk used to say, however, that every rise has a peak, every decline has a bottom. Surely the price increases in Tallinn must eventually stop? Perhaps they will, but neither a pig nor a peasant can tell here when that will happen. There were times when 1000 €/m2 seemed like magic. The same has been true with the 1500 €/m2 mark, not to mention the 2000 €/m2 threshold, which today seems almost tangible. It must be admitted that the macroeconomic situation today points to cooling and a slowdown in economic growth, and therefore one would have to be far above average optimistic, not to say utopian, to bet on real estate price growth in the coming years. If cooling should also affect the real estate market and prices should be frozen for years or even fall, then in the middle of a new growth cycle, for example in 2029, we can probably with a peaceful heart wave our tail lights toward the 2000 €/m2 price level.
Article source: Domus Kinnisvara
