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Arco Vara
Minutes of annual general meeting

Decisions of Annual General Meeting of Shareholders of Arco Vara AS

The annual general meeting of shareholders of Arco Vara AS held on 30 May 2017 adopted the following decisions:
 

  1. To approve the annual report of Arco Vara AS for 2016;

  1. To cover the net loss for the year ended on 31 December 2016 in the amount of 832 thousand euros from retained earnings;

    to pay dividends to the shareholders 0.01 euros per share, in the total amount of 65 070.12 euros. The list of shareholders entitled to dividends shall be fixed as at 14 June 2017, 23:59 PM. Dividends shall be paid to the shareholders by transfer to the bank account of the shareholders on 16 June 2017.

  1. To increase the share capital of Arco Vara AS conditionally by issuing up to 12 convertible bonds with the nominal value of 500 euros each in accordance with the conditions of the convertible bonds which are included in the materials of the AGM made available to the shareholders;

    provided that the net profit of Arco Vara group for the years 2017-2019 is at least 5.5 million euros, the convertible bonds will give the owners the right to subscribe for the total of up to 200,000 shares of Arco Vara AS for 0.7 euro per share starting from 10 May 2020 until 31 December 2020;

    in case of subscription the Management Board of Arco Vara may increase the share capital by up to 140,000 euros, i.e by 200,000 shares;

    the existing shareholders will waive their pre-emptive rights for the subscription of the convertible bonds as well as the pre-emtive rights for the shares issued after the conversion of the convertible bonds.

  1. To appoint an auditor for one year (until the next annual general meeting of shareholders) and appoint PricewaterhouseCoopers AS as the auditor. To pay the auditor for auditing the 2017 annual report according to the agreement concluded between Arco Vara AS and PricewaterhouseCoopers AS.

 

         Evelin Kanter
         Head of Legal Department
         Arco Vara AS
         Tel: +372 614 4594
         This email address is being protected from spambots. You need JavaScript enabled to view it.
         http://www.arcorealestate.com

Arco Real Estate Bulgaria was financed by the Operational Programme "Human Resources Development", financed by the European Union through the European Social Fund. The project is worth 216 259.24 lv.

The overall aim of the project is to provide preconditions for creation of sustainable jobs in Arco Real Estate Bulgaria for the unemployed and inactive persons with priority to integrate in the labor market of vulnerable groups and unemployed young people under 29 years of age, long-term unemployed and unemployed over 54 years. This will satisfy the need of company to create new positions.

The project provides the hiring of Arco Real Estate Bulgaria of 15 unemployed and inactive persons and aims to provide them with employment and integration into the labor market. Envisaged to implement project activities aim to create preconditions and terms to hire new employees, training on key competence 4 "Digital competence" to acquire knowledge and skills in software program for working with spreadsheets and to secure workflow by purchasing the necessary equipment, furniture and software for 15 jobs for the 15 representatives of the target group.

__________________________________

 

"АРКО ИМОТИ" ЕООД“, беше финансиран от Оперативна програма „Развитие на човешките ресурси“, съфинансирана от Европейския съюз чрез Европейския социален фонд . Проектът е на стойност 216 259,24 лв.

Общата цел на проекта е да се осигурят предпоставки за създаване на устойчиви работни места в „АРКО ИМОТИ“ ЕООД за безработни и неактивни лица, с приоритет към интегриране на пазара на труда на уязвимите групи на безработните младежи до 29 годишна възраст, продължително безработните и безработните над 54 г. По този начин ще се удовлетвори необходимостта на предприятието от разкриване на нови работни места.

Той предвижда наемането от „АРКО ИМОТИ“ ЕООД на 15 безработни и неактивни лица и цели да им осигури заетост и интегриране на пазара на труда. Предвидените за изпълнение дейности по проекта целят създаване на предпоставки и условия и наемане на нови служители, провеждане на обучение по ключова компетентност 4 „Дигитална компетентност“ за придобиване на знания и умения по софтуерна програма за работа с електронни таблици и обезпечаването на работния процес чрез закупуване на необходимото оборудване и обзавеждане и софтуер за 15 работни места за 15те представители от целевата група.

 

Overview of the residential market in Tartu and Tartu county (as at the end of December 2016)

 

In Tartu county, most transactions with improved residential land are made in Ülenurme municipality and Tartu town. Transaction activity is followed by Tartu municipality, Haaslava, Luunja and Tähtvere municipality. Differently from the transactions in Tartu town the near municipalities mostly concern new developments. Irrespective of the regional difference of transaction activity, the price levels of Tartu town and its neighbouring areas are not very differently priced, when considering the statistics. In the neighbouring municipalities of Tartu the transactions with the lowest prices have been done in Tähtvere municipality, where there are also only single residential regions.

 

Price level and transaction activity growth were led in Q4 by Tartu town’s neighbouring municpalities

In Q4 2016, 117 transactions with improved residential land were made in Tartu county as a whole, which was by 29% less than in Q3. Transaction price arithmetic average was 91,574 euros and median price 72,000 euros. Arithmetic average increased thus by 7,6% and median price 5,4%. Compared to Q4 2015, transaction activity increased by 18%, arithmetic average by 14% and median price by 9,1%. Residential market indicators have been rather unchanged; growth in transaction activity and price levels has occurred in the municipalities mainly on the account of new developments and more expensive secondary market objects. The residential market has moved away from the county centre, thus the level of transactions and price levels have been retained by the transactions in Tartu’s neighbouring municipalities.

 

In Q4 2016, 27 improved residential land transactions were made in Tartu town, which was 51% less than in Q3 and 23% less than in Q4 2015. Transaction price arithmetic average was 108,000 euros and median price 100,000 euros, which decreased from previous quarter by 2,3% and 2,0%. Arithmetic average increased from the same period by 7,6% while median price decreased by 6,5%. Price level has remained on a rather same level in a quarterly perspective, but the number of transactions has started to decrease somewhat. Decline in transaction activity is supported the seasonal nature of the market, the poor structure of dwellings with optimal closed net surface that are in a good state, and constantly increasing offer-based prices.

 

Due to the seasonality of the real estate market, it became more active in the larger areas in Estonia in Q3 both in August and September. Similarly to previous years, the residential market has lost part of its activity due to the approaching of winter in Q4. Differently from Tallinn and previous years, the expected growth in price levels in Christmas in Tartu and its neighbouring area was not seen; the more regular price increase in the end of the year became apparent already in November.

 

In December, a total of 33 improved residential land transactions awere made in Tartu county, the number of transactions increased from November by 11% but from December 2015 the number of transactions increased even by 50%. Arithmetic average transaction price was 104,000 eurots and median price 92,000 euros. Arithmetic average increased from November by 12% but decreased from December 2015 by 1,3%. Median price decreased since November by 3,2% while the decrease from the same time in 2015 was by 4,2%. The growth in price levels in the last years deduces from the transactions with more expensive secondary market and new developments, thus the price increase has occurred on the residential market as a whole.

 

In December 9 improved residential land transactions were made in Tartu town, with the arithmetic average transaction price of 84,000 euros and median price of 92,000 euros. Compared to November, 13% more transactions were done in Tartu, while the arithmetic average transaction price decreased by 43% and median price by 22%. Compared to December 2015, 25% less transactions were made in Tartu town, arithmetic average price level decreased by 29% and median price 28%. Major changes in the price levels depend on the few transactions and the fact that the sales of new developments and more expensive dwellings has become more frequent. In term of transactions in December, there were many transactions below 10,000 euros, which were not free market transactions but which enhance the decrease I statistic average price level.

 

Regional specificities of the residential market and consumer preferences

In terms of Tartu town, the most preferred residential areas are Tammelinn, Veeriku, Raadi-Kruusamäe and Ihaste. In these areas, there are also the largest residential areas in Tartu town. Differently from the general buildings in Tartu town, consumers do not prefer to acquire timber construction buildings characteristic to Tartu town. Both in Tartu town and its neighbouring municipalities mainly buildings with a stone construction and ground heating are looked for, the closed net surface of which remains between 150-200 m2.

 

The prices of residential buildings that need renovation start in Tartu town usually from 80 000 – 100,000 euros. The sales offers and transactions of residential buildings in a good state are usually between 120,000 – 170,000 euros. The price level of residential buildings in a very good state starts from 170,000 euros, high quality renovated buildings with a good location or new developments cost up to 250,000 euros. Most often sought buildings in Tartu are single family dwellings between 150,000 – 175,000 euros. Most important is considered to e the spatial plan and beneficial utilities.

 

Due to the scarcity of new developments in Tartu town suitable offers are mainly looked for in Ülenurme municipality, followed by Luunja, Tartu and Haaslava municipality. In the neighbouring areas of Tartu the price depends mainly on the location and the surrounding living environment, infrastructure, construction quality and the related solution. Price levels in areas close to the town are mainly between 200,000 – 250,000 euros.

 

Arco Vara estimates that the typical house purchaser in Tartu or its neighbouring areas is a young family with one to three children. In terms of suitable offers, the choice depends on the household income and thus loan capacity. Due to new developments the price levels are becoming more expensive when moving outwards from Tartu town, but the areas away from the small towns are ina lower price class (up to 80,000 euros).

 

In case of unimproved residential land, the most preferred plots are with communications (water and sewerage, electricity). The prices of unimproved residential land plots with communications in the neighbouring areas of Tartu town are mainly between 20,000 – 50,000 euros. The highest price levels have been in Raadimõisa residential area and Ihaste. The plots suitable for building of individual dwellings have been available less than the demand, which has been promoted mainly by the financing possibilities for development following the financial crisis and thus the low interest of real estate developers for planning and developing of residential areas.

 

Offer-demand dynamics

In 2016, 521 improved residential land transactions were made in Tartu county, which was by 9% more than in 2015 – the number of transactions was on the highest level since last years, being similar to the number of transactions in 2004 and 2007. Arithmetic average price level increased from 2015 by 17% and median price by 24%, price level has increased for new developments and more expensive secondary market objects. In the neighbouring municipalities of Tartu town interest has increased for new developments, this especially in Haaslava municipality.

 

The price levels of Tartu town and Tartu county residential market have grown in a stable pace in the last years, the increase became much quicker in 2016. The number of offers on the residential market was in a quick growth trend since 2013, but in 2016 the number of offers started to decrease to the similar level. In 2016 the number of offers of residential buildings decreased in Tartu county and Tartu town from June to September, after which offers have started to increase again, this especially outside the county centre. Based on short-term statistics, the price levels have somewhat increased on the background of the changes in the number of offers, which is mainly due to the constant addition of new developments.

 

When acquiring new developments or a residential building, consumers are choosing first between objects with the highest price, while the consumer confidence and requirements remain high. In terms of Tartu town, new developments have mainly built to more expensive areas – Kvissentali and in Ihaste, Hipodroomi development area; the expansion of these areas will remain topical also in the near future.

 

Outside the town, the historically most preferred area for buying a residential building and construction has been Ülenurme municipality. As a result of the fast growth of Ülenurme municipality and the related construction activity the suitable plots for construction are coming to an end in more preferred areas, thus the development is calming down. Construction of new developments has increased above all in the neighbouring municipality of Ülenurme municipality - Haaslava municipality. Haaslava municipality has many areas where the plots measured out in the boom period are finally finding purchasers.

 

Construction of an individual dwelling takes usually a year. The big difference in the number of construction and usage permits can depend on the fact that the absence of a usage permit does not hinder the putting into use of a dwelling but its sales (if the purchaser wants to finance it with bank loan). As single-family dwellings are usually built for oneself, not for sale, many dwellings receive usage permit with a temporal shift.

 

Forecasts

Compared to apartment market, residential building market is rather little active; thus, conclusions cannot be made for a longer perspective based on short-term statistics. Some statistic price changes depend on the transactions done with single very high or low prices. The residential market has also price levels for which sellers are ready to negotiate the price; thus, when reaching the actual transaction, offer and transaction prices usually differ by up to 10% (according to statistics of Arco Vara in 2016, in Tartu county on the average of 5%).

 

After the construction legislation that entered into force on 1 July 2015 residential building market has become more complicated as for Estonian real estate market. When purchasing with a bank loan, the credit institutions require that the documentation related to the dwelling is correct (incl. construction and usage permits, construction project and in case of smaller changes also construction notice/usage notice). Above all illegal buildings need legalisation; this happens mainly with older immovables where several outbuildings have been also built to the yard besides the dwelling.

 

In addition to available documentation and its importance access to the properties from public roads is also important. Property appraisers encounter many properties for which access from a public road has not been ensured. Until there is no access through a legal servitute, banks do not usually agree to finance the purchase.

 

Leaving aside the restrictions of commercial banks for enlivening of the residential market, no major changes are expected on the residential building market of Tallinn and its neighbouring areas in the near future. Dwellings are searched and purchased mainly by households that earn more than the average and whose social and economic welfare remains positive according to forecasts in the near future. According to estimates from Arco Vara, the prices of residential buildings in more demanded areas and plans can rise somewhat, but shortening of the sales period of more expensive residential buildings cannot be expected. Based on the statistics of Arco Vara, the average sales period of single, semi-detached dwellings, terraced house boxes in Tartu county was 272 days in 2016.

 

In Q1 2017, annual decline can be expected in the number of transactions due to the seasonal nature of the real estate market, where some moments of decline can be also seen in the formation of price levels. Average prices will be retained both by new developments and more expensive secondary market objects and also by the current high offer prices with the somewhat poor offer structure. In Q1, some addition of offers can be expected due to seasonality, which deduces from the fact that the interest for buying real estate decreases in winter; thus, the number of transactions decreases and the number of offers increases.

 

Overview of residential building market in Harju county (as at the end of December 2016)

 

In Harju county, most transactions with improved residential land are made outside the capital in areas close to Tallinn, where there are the most residential regions. Viimsi and Harku municipality stand out in terms of transaction activity. Purchasers’ preferences are the highest for up to 20 km outside of Tallinn that can be also considered the zone of going to work to Tallinn. Outside the municipalities close to Tallinn and the close areas to the county’s bigger centres, interest has remained modest. Differently from transactions done in Tallinn, the transactions in the neighbouring areas concern mostly new developments.

 

Price and transaction activity growth in Q4 was mainly led by new developments

Due to the seasonal nature of the real estate market, it became more active in Estonian larger areas in Q3 in August and September. In Q4, transaction activity started to decrease quickly, both compared to previous months and the same time last year. December turned out to be somewhat more active like in previous years, raising the price levels much higher in the Christmas month. The real estate market of the autumn supported by the weather conditions and Christmas expectation kept the interest high. On residential market, the sellers’ price wishes and purchasers’ preferences have remained rather similar to the previous quarters. Above all, the price wishes of new development offerers have increased like the demand for new developments. According to Arco Vara, there are sufficient offers on the market to meet the demand.

 

In Q4 2016, 22% less transactions were done with improved residential land in Harju county as a whole 22% than in Q3. The arithmetic average of transaction prices was 145,000 euros and median price 135,000 euros. Arithmetic average increased by 7,8% and median price even by 42%. Compared to Q4 2015, transaction activity increased only by 1,8%, arithmetic average transaction price increased by 12% and median price by 35%. Residential market indicators have remained largely unchanged; transaction activity has remained rather on the same level as earlier periods due to seasonality.  The growth of transaction activity and price level has occurred mainly in the capital and areas close to it with reference to new developments.

 

In December, a total of 125 improved residential land transactions were done in Harju county as a whole. Compared to November, the number of transactions had increased by 17% and compared to the same time in 2015 by 5,0%. The arithmetic average transaction price was 160,000 euros and median price 153,000 euros. Arithmetic average increased from November by 17% and by 10% from December 2015. Median price increased from November by 28% and compared to the same time in 2015 by 19%. The quick growth of both the median price and arithmetic average had significantly increased compared to previous periods. The number of transactions has constantly decreased since the summer of 2016, but the price level has strongly grown on the account of more expensive secondary market and new developments.

 

Harju county residential building market by municipalities

Harju county’s residential building market is formed mostly by more active areas in real estate market, of which the most important part form towns led by Tallinn and then municipalities close to the capital. Differently from the apartment market of Harju county, the residential market is somewhat more active when moving away from the capital; in areas where apartment s are not sought, it is easier to find a buyer to residential buildings. Among municipalities, the most preferred are these close to the roads leading out of Tallinn or close to the municipality centres.

 

Regional transactions’ number and price dynamics in Harju county municipalities in Q3 2016

Municipality *

Median transaction price

Change of median compared to last quarter

Change of median compared to the same time last year

Change in transaction number compared to previous quarter

Change in transaction number compared to the same time last year

Anija

25 000

25,0%

- **

0,0%

175,0%

Harku

65 000

-18,5%

-12,8%

-38,9%

-21,4%

Jõelähtme

110 000

91,3%

29,4%

-18,8%

-13,3%

Keila

52 500

20,8%

5,0%

-57,1%

-42,9%

Kernu

24 000

20,3%

50,0%

-22,7%

0,0%

Kiili

112 000

69,1%

-17,0%

10,0%

46,7%

Kose

135 000

320,2%

64,6%

-33,3%

20,0%

Kuusalu

65 000

62,5%

-29,5%

-23,1%

0,0%

Rae

213 950

20,9%

22,3%

16,7%

16,7%

Saku

69 000

-8,0%

15,0%

-27,6%

23,5%

Saue

186 018

77,2%

431,5%

100,0%

84,6%

Viimsi

153 388

20,0%

4,0%

-34,1%

-35,7%

* Municipalities where less than 5 transactions with improved residential land were conducted are not included in the table

** too few transactions were done in the area and thus have not been included here

Source: Land Board, transaction database

 

In term of Harju county municipalities, the most active areas are the municipalities close to Tallinn. These are Harku, Viimsi, Rae and Saue municipality that are all characterised by urbanisation due to the closeness of Tallinn and high activity of construction activity. The buildings concerned in these areas are usually new developments. When distancing somewhat from Tallinn, the most active areas are Saku, Kernu, Keila, Kiili and Jõelähtme municipality.

 

As for the number of transactions and median price in municipalities, more thorough conclusions cannot be made differently from the above mentioned areas, since regional transaction activity is too low to report forming trends.

 

Harju county’s residential market regarding towns

As for towns in Harju county, besides Tallinn, Maardu town is also active in terms of residential and apartment market; this is due to the town size and the immediate closeness of Tallinn. In other towns in Harju county, the general real estate market and residential market are rather little active compared to Tallinn town and its neighbouring areas. The residential market of small towns in Harju county is formed by residential buildings built in 1940-1990; new developments are mainly from 2011-2016.

 

Regional transaction number and price dynamics in Harju county towns in Q4 2016

Town *

Median transaction price

Change of median compared to last quarter (%)

Change of median compared to the same time last year (%)

Change in transaction number compared to previous quarter (%)

Change in transaction number compared to the same time last year (%)

Keila town

97 500

-27,8%

-27,8%

-45,5%

20,0%

Maardu town

55 000

-8,3%

25,0%

-10,5%

-32,0%

Tallinn

198 500

9,1%

10,3%

-15,2%

-20,8%

* Municipalities where less than 5 transactions with improved residential land were conducted are not included in the table

** too few transactions were done in the area and thus have not been included here

Source: Land Board, transaction database

 

In Q4 2016, transaction activity and price levels in the small towns in Harju county remained without major changes compared to earlier periods. As for small towns in Harju county thorough conclusions cannot be made due to short-term statistics, since the regional transaction activity is too low to report major trends. The number of transactions has started to decrease in Tallinn and the small towns in Harju county; the constant growth in price level can be thereby seen only in the capital.

 

Regional specificities of the residential market and consumer preferences

As for Harju county the most preferred areas outside Tallinn are above all naturally beautiful and private locations. The most preferred areas are in Harku and Viimsi municipality, thus the closeness of the sea and Tallinn are preferred. The price levels of areas close to Tallinn and also naturally beautiful are rather similar to the residential building prices close to its neighbouring areas.

 

The high season for purchasing unimproved residential land and buildings in need of renovation is above all in spring and summer. In spring, more ready buildings or buildings in need of renovation are searched in order to move in immediately or finalise the construction works during summer. As for purchases of unimproved residential land, autumn is more likely time, as starting construction works takes usually more time due to documentation after which the works can be started in spring.

 

For purchasers of residential or unimproved residential land, the region’s structure and state of roads and street network is most important. In areas with no complete infrastructure the plots are still of low liquidity following the once-time boom period. Interest for half-finished buildings has also decreased due to the high share of buildings that are ready or suitable for moving in. People are ready to pay higher price only for higher construction quality, internal finishing in a good state or a spacious plan.

 

Both in Tallinn and its neighbouring municipalities, residential buildings in a stone construction and with modern heating solutions are searched (electricity and liquid heating are the least valued), the closed net area of which is between 150-200 m2. In a state where incomes have steadily grown and general level of welfare is high residential buildings in a good state and ready for moving in are sought. New developments with a spacious plan, functionality, developed infrastructure and low utilities are preferred.

 

The prices of residential buildings that need renovation start in Harju county usually from 50,000 euros. The sales offers and transactions of residential buildings in a good state are usually between 80,000 – 130,000 euros. The price level of residential buildings in a very good state is between, 130,000 – 200,000 euros. The price level of summer houses close to Tallinn is usually between 25,000 – 50,000 euros depending on the state and location of the building. Summer house prices are mainly influenced by waterbodies close by and the state of the living condition.

 

Arco Vara estimates that the typical house purchaser in Tallinn or its neighbouring areas is a young family with one to three children. In terms of suitable offers, the choice depends on the household income and thus loan capacity. The price levels of residential buildings are usually higher in Tallinn and its neighbouring areas by the sea; when moving away from the capital toward the inland, the prices are becoming cheaper due to the distance.

 

Offer-demand dynamics

In 2016, 3.8% less transactions were made with improved residential land in Harju county compared to  2015, while the median price increased by 16% and arithmetic average transaction price by 11%. The number of transactions has been on the same level for several years, but considering the higher transaction prices, the average price levels have increased.

 

Differently from the apartment market, the number of offers on the residential market has remained rather unchanged since 2014. In 2016, the number of offers in Harju county decreased somewhat from August to December; in 2016 as a whole, the number of offers decreased by 2,5%. Based on short-term statistics, offer-based price levels have increased; real transaction prices have grown constantly compared to previous periods only in the neighbouring areas of Tallinn. Residential market is characterised by the seasonal decline in the number of offers in autumn and spring.

 

Consumers prefer new developments and when buying a property, selection is first made among properties with higher price; the purchasers’ confidence and requirements on housing remain high. As for Harju county, most new developments are built to areas in the immediate vicinity of Tallinn. These areas are the small towns and villages located mainly in Viimsi, Harku, Saue, Saku and Rae municipality and characterised by constant population growth. New development areas constantly arise for new developments when distancing from Tallinn, because suitable plots close to the city in more preferred areas are decreasing.

 

Construction of an individual dwelling takes usually a year. The big difference in the number of construction and usage permits can depend on the fact that the absence of a usage permit does not hinder the putting into use of a dwelling but instead the sales process (if the purchaser wants to finance it with a bank loan). As single-family dwellings are usually built for oneself, not for sale, many dwellings receive usage permit with a temporal shift.

 

Forecasts

Compared to apartment market, residential building market is rather little active; thus, conclusions cannot be made for a longer perspective based on short-term statistics. Some statistic price changes depend on the transactions done with single very high or low prices. The residential market has also price levels for which sellers are ready to negotiate the price; thus, when reaching the actual transaction, offer and transaction prices usually differ by up to 10% (based on statistics of Arco Vara, on the average 6,3%).

 

After the construction legislation that entered into force on 1 July 2015 residential building market has become more complicated as for Estonian real estate market. When purchasing with a bank loan, the credit institutions require that the documentation related to the dwelling is correct (incl. construction and usage permits, construction project and in case of smaller changes also construction notice/usage notice). Above all illegal buildings need legalisation; this happens mainly with older immovables where several outbuildings have been also built to the yard besides the dwelling.

 

In addition to available documentation and its importance access to the properties from public roads is also important. Property appraisers encounter many properties for which access from a public road has not been ensured. Until there is no access through a legal servitute, banks do not usually agree to finance the purchase.

 

Leaving aside the restrictions of commercial banks for enlivening of the residential market, no major changes are expected on the residential building market of Tallinn and its neighbouring areas in the near future. Dwellings are searched and purchased mainly by households that earn more than the average and whose social and economic welfare remains positive according to forecasts in the near future. In a situation where construction prices and the number of dwelling sales offers remain high one cannot expect shortening of sales periods or price levels. Based on the statistics of Arco Vara, the average sales period of the single-family dwellings, semi-detached houses and terraced house boxes in Harju county has been 210 days in 2016.

 

According to estimates from Arco Vara, the prices of residential buildings in more demanded areas and plans can rise somewhat, but shortening of the sales period of more expensive residential buildings cannot be expected. In Q1 2017, some decline can be expected in the transaction activity due to the season and thus some addition of offers. On the background of the large share of transactions with new developments, the average price level is estimated to be on the same level as in previous months.

Overview of the apartment market in Harju County (as at the end of December 2016)

 

Of the transactions of apartments in Harju County, majority is formed by transactions in Tallinn and its neighbouring areas. Outside of Tallinn, the majority of transactions is made in nearby municipalities - Rae, Saue, Viimsi, Harku and Saku municipality. Besides these municipalities, the majority of transactions is also made in satellite small towns close to Tallinn, which are the towns located in Harju county - Maardu, Kehra, Keila, Saue, Loksa and Paldiski town. Real estate prices are strongly influenced by the distance of Tallinn or its bigger satellite regions and the closeness of major roads leading outside the city.

 

Transaction activity and price increase stayed stable in Q4

In Q4 2016, 3,109 apartment transactions were done; this was by 8,0% more than in Q3. Within the quarter, the arithmetic average transaction price was 1,579 €/m2 and median price 1,524 €/m2, which increased from Q3 by 1,5% and 1,0%. Compared to the same time in 2015, in Q4 3,1% more transactions were conducted, while the arithmetic average square metre price increased by 9,4% and median price by 7,1%.

 

As a whole, changes in transaction activity and price level in Harju county are related to actions on Tallinn real estate market; changes in the centre move during some time to areas with smaller population density. Similarly to Tallinn, the county as a whole is marked by a slowing down of the quick growth in transaction activity and price levels.

 

In December 1,145 transactions were made on the apartment market in Harju county, which by 16% in November 6,2% more than in the same month in 2015. The arithmetic average price of apartment transactions was in December 1,633 €/m2 and median price 1,593 €/m2. Arithmetic average decreased from November 3,0% and median price 5,3%. Compared to December 2015, arithmetic average decreased by 10,8% and median price 6,8%.

 

Growth in transaction activity was especially high compared to November, which was due to the seasonal growth in annual transaction activity characteristic to the Christmas period. Transaction activity increased mainly only in Tallinn; in areas within the county, 7,4% more transactions were done than in November. On the background of the impulse purchases in Christmas, the price levels of apartment transactions in the county as a whole did not increase very much differently from Tallinn; based on the changing median price it is seen that apartment transactions are done on increasing price levels. The constant growth in transaction activity has stabilised; increase in price level deduces from the transactions on growing price levels with secondary market apartments and new developments outside the county centre.

 

Transaction activity in Harju county and Tallinn town and the price dynamics in 2006-2016

Source: Land Board, transaction database

 

Apartment market in Harju county by municipalities

Harju county apartment market is formed above all by more active areas in terms of real estate market, of which the most important part is formed by Tallinn and thereafter municipalities in Harju county. As follows, the real estate market of Harju county has been divided into separate parts to describe the apartment market - Harju county municipalities and Harju county towns.

 

The number and price dynamics of the apartment market in Harju county municipalities in Q4 2016

Municpality *

Median (€/m2)

Change of median compared to last quarter

Change of median compared to the same time last year

Change in transaction number compared to previous quarter

Change in transaction number compared to the same time last year

Anija

572

44,9%

44,5%

45,5%

6,7%

Harku

1 409

10,5%

11,7%

42,9%

21,2%

Jõelähtme

1 211

-7,2%

11,8%

-20,0%

-11,1%

Keila

295

-41,7%

-46,1%

26,7%

18,8%

Kiili

1 142

- **

-16,3%

200,0%

-18,2%

Kose

458

87,2%

-7,9%

-6,7%

-30,0%

Kuusalu

458

-18,7%

20,1%

30,0%

30,0%

Nissi

208

-2,1%

36,4%

-28,6%

-50,0%

Raasiku

857

-25,5%

5,1%

30,8%

112,5%

Rae

1 506

3,8%

0,9%

4,8%

-15,4%

Saku

1 250

-18,5%

26,7%

-52,4%

25,0%

Saue

1 506

3,9%

6,8%

44,4%

116,7%

Vasalemma

166

118,1%

624,2%

0,0%

-57,1%

Viimsi

1 494

0,8%

3,8%

-4,2%

-30,6%

* Municipalities were less than 5 apartment transactions were done are not included in the table.

** In municipalities that have not been accounted in the table, too little transactions were conducted during this period in order to publish the data.

Source: Land Board, transaction database

 

In terms of municipalities in Harju county, most active apartment market areas are the municipalities close to Tallinn. These are Harku, Viimsi, Rae and Saue municipality that area characterised by the urban sprawl close to Tallinn and activity of construction activities. In these municipalities, there are most new developments in areas outside of Tallinn, per the residential fund of Harju county; the other Harju municipalities are characterised by the apartment buildings built mainly in 1940-1990.

 

As for the number of transactions and median price in municipalities, thorough conclusions cannot be made on the real estate market except for Harku, Rae, Viimsi and Saue municipality, as the regional transaction activity is too low to report trends under formation.

 

Harju county apartment market in terms of towns

In terms of the towns in Harju county, in addition to Tallinn, Maardu town is also most active. This deduces from the town size and the immediate closeness of Tallinn. In other towns in Harju county the general real estate market and apartment market is rather little active when compared to Tallinn. Small towns’ apartment market is mainly formed by the apartment buildings built in 1940-1990, single new developments can be seen in Keila, Maardu and Saue town, but rather little transactions are made with them.

The number and price dynamics of the apartment market in Harju county towns in Q34 2016

 

Town

Median (€/m2)

Change of median compared to last quarter

Change of median compared to the same time last year

Change in transaction number compared to previous quarter

Change in transaction number compared to the same time last year

Kehra

576

8,4%

28,6%

71,4%

0,0%

Keila

1 037

-5,7%

5,8%

-2,5%

5,4%

Loksa

150

-32,6%

3,7%

0,0%

80,0%

Maardu

885

3,2%

13,4%

-1,7%

-17,4%

Paldiski

415

18,4%

16,9%

-3,7%

-33,3%

Saue

1 178

10,4%

-0,9%

0,0%

-22,2%

Tallinn

1 599

0,9%

6,4%

8,8%

5,4%

Source: Land Board, transaction database

 

In Q4 2016, the transaction activity and price level in the apartment market of Harju county small towns were without major changes compared to previous periods; growth of price level has been retained, but transaction activities have periodically decreased, this above all in Maardu and Paldiski. As for small towns in Harju county, more thorough conclusions can be made only in terms of Maardu due to short-term statistics, since regional transaction activity is too low to reflect shaping trends.

 

Offer and demand dynamics

In 2016, 11 316 apartment transactions were done in Harju county, which was 3,3% more than in  2015. The arithmetic average transaction price was 1,519 €/m2 and median price 1,478 €/m2, which had thus increased by 5,7% and 6,1%. Growth in price level and transaction activity had stopped compared to previous years; the growth has occurred mainly in Tallinn and its neighbouring areas. Without considering the statistics related to Tallinn, 1,7% less transactions have been done in Harju county in 2016 than in 2015; thus, in 2016, activity on the apartment market has been led only by Tallinn.

 

Real estate prices have significantly grown in the last years. Consumers purchasing residential surface have become more calculating due to the wide selection of offers, but extension of the sales period of apartments cannot be seen. Based on Arco Vara statistics, in 2016, the average sales period of apartments in Harju county was 213 days. Outside of Tallinn, prices of apartments in a good state have mainly grown, while consumer interest has increased for renovated apartment houses.

 

In more active small towns, the poor structure of offers has benefited a growth in offer prices and a decrease in transaction activity; significant new offers are added only in the extent of new developments. In case of apartments in a poor state and in need of repair, the interest is lower and the price increase has been also slower. According to Arco Vara’s estimates, there are sufficient offers on the county market as a whole in order to satisfy the current demand.

 

In case of housings in Tallinn and its neighbouring areas, demand remains high mainly in areas closer to the capital or in areas with good public transport connection. Apartments outside Tallinn are looked for mainly by younger people who need to work in Tallinn but who cannot buy a surface there. Differently from the high real estate prices in Tallinn and neighbouring areas, people who move to farer in the county can buy a bigger apartment for the same price.

 

In terms of farer areas in the county, the demand is influenced mainly by the sustainability and structure of the local centre. Areas where young people go to live have to have a shop, kindergarten and school. In case of Loksa, Kehra, Paldiski, Kose and Kuusalu, it can be marked that mainly older people stay in these areas. Younger people leave due to the distance of Tallinn and the costs related to constant back and forth travelling. In case of apartments in small towns, purchase power can be limited also by the higher central heating costs when compared to the level of Tallinn.

 

In terms of new developments, areas which are related to more than buying a place to live have been started to prefer. Projects that can offer besides general construction quality and price also a complete social-economic and natural living environment are preferred. New developments have been built mostly to Rae municipality but also to Viimsi, Harku, Saue, Saku and Jõelähtme municipality. The price offers for new developments in Harju county remain mainly between 1,300-1,900 euros. Interest for new developments in the county is rather high, but real estate developers do not see the sense in moving to smaller markets due to the low state of the price level.

 

The growth of price and transaction activity in the last years has been also followed by the constantly growing number of offers. According to the www.kv.ee portal, the growth in the number of apartment offers in Q4 2016 in Harju county had quickly stopped. In the start of 2017, there were as much active offers as in the same time in 2016. The number of sales offers has decreased due to seasonal changes compared to previous months by about 2% a month since September 2016. On the background of decreasing volume of offers, offer-based prices have increased monthly by about 1%, being thus strongly influenced by the offers in Tallinn. Despite the fact that the number of offers has continuingly grown in terms of years, major decline moments cannot be seen in price level changes, but the level of the number of prices is terminating the growth of price level.

 

Forecasts

Similarly to Tallinn, the prices of residential real estate have been constantly growing in Harju county after the financial crisis of 2008, since the second half of 2009. By now, the price levels in Tallinn and neighbouring areas have reached the top level of a year ago. Due to the big number of offers and the related competition,  the growth of price levels has slowed down in many areas close to Tallinn and do not have significant space of growth in current market conditions.

 

Transaction growth has been accompanied in the last two quarters by a decrease in the volume of offers; thus, there can be some pressure for the further growth of price levels. In a situation where construction prices are stable but plot prices are too expensive for developers no significant growth can be seen in the extent of private orders in the construction sector in the near future and thus an additional offer for apartments added. In Harju county, apartment prices have grown less than in Tallinn, but enlivening of the real estate market has been similar in the entire county.

 

In Tallinn, the main problem in the near future will be above all the high share of new developments and the number of such offers in 2016 has benefited the growth in transaction activity and average price level. The transaction activity and price level on the older residential fund on the secondary market has been stable for a longer time already. In terms of the stabilisation of new developments in apartment transactions, a statistic slowing down is expected in the growth of price levels and transaction activity.

 

In Harju county as a sparsely area, the share of new developments from the entire apartment market is marginal; thus, the price level in Harju county’s small towns and municipalities is stable and does not react immediately to the possible changes in the transaction and price dynamics on Tallinn apartment market. Until the incomes of Harju county residents and the general level of welfare grow, unemployment is low and commercial banks still issue loans in the environment of low interest rates, no significant changes are expected on the apartment market of Harju county in the near future. In a long-term perspective, the migration to Harju county and Tallinn is expected to decrease, inflation to increase and the current wage growth to decrease, based on which the current transaction activity is expected to decline somewhat.

Overview of the residential market in Tallinn and its neighbouring areas (as at the end of December 2016)

 

Within Tallinn, the larger residential areas include above all Nõmme, Pirita, Haabersti and Kristiine district, in a smaller extent, transactions are also made in the city centre, north Tallinn and Mustamäe. Due to the high price level of Tallinn consumers purchase increasingly more dwellings to the neighbouring areas of Tallinn[1], with most residential regions. Annual transaction activity is the largest in Viimsi and Harku municipality. Preferences are higher up to 20 km from Tallinn that can be also considered the zone of working in Tallinn. Outside the neighbouring municipalities of Tallinn and the neighbouring areas of the county’s major centres, purchasers’ interest has remained modest.

 

In Q4 transaction activity decreased, while price level remained ina  growing trend

Due to the seasonal nature of the real estate market, the real estate market became more active in Estonian larger areas in Q3 in August and September. The residential market has lost its activity in Q4 similarly to previous years when the winter approaches. Annually, a price level increased can be noticed in the second half of Q4 related to the impulse purchases in the Christmas month, which was visible also in December 2016. On the residential building market, sellers’ price wishes and purchasers’ preferences have remained similar to previous quarters. The price wishes of new development offerers have increased as well as the respective demand. According to Arco Vara, there is a suitable number of offers on the market to satisfy the demand, but the number of offers has constantly decreased within Tallinn for a longer time.

 

In Q4 2016, 85 transactions were done with improved residential land in Tallinn, by 14% less than in Q3. The arithmetic average of the transaction prices was 230,000 euros and median price, 199,000 euros. Arithmetic average decreased from previous quarter by 3,1% while median price increased by 9,7%. Price decrease was caused by an increase in transactions with older buildings. Compared to the same time in 2015, transaction activity decreased by 20%, arithmetic average transaction price increased by 18% and median price by 10%. On Tallinn residential market, both the transaction activity and price levels have remained on a rather same level for a longer time; due to seasonality, the indicators have changed somewhat more drastically. The growth in price levels in the last months deduces from the transactions with more expensive secondary market and new developments, thus the prices have increased on the residential market as a whole.

 

The residential market dynamics of the neighbouring areas of Tallinn overlaps largely with Tallinn city, moving in the same rhythm as the capital real estate market. In neighbouring areas as a whole, 150 transactions were made with improved residential land in Q4 2016, which was by 16% less than in Q3 and by 8,0% less than in Q4 2015. The calculated average transaction price in the area was 141,000 euros, which was by 4,8% more than in previous quarter and by 15% more compared to the same time in 2015. The transaction activity in neighbouring areas decreased less than in Tallinn, but the moderate growth of price levels has occurred in the same extent in the capital and the surrounding areas. The number of transactions decreased the most in Viimsi and Harku municipality, but Saue municipality has stood out the most in terms of price level and transaction activity.

 

In December, 26 improved residential land transactions were made in Tallinn, which was 21% less than in November and by 3,7% less than in December 2015. The arithmetic average transaction price was 267,000 euros and median price 233,000 euros. Arithmetic average increased from November by 30% and from December 2015 by 16%. Median price had also increased, increasing from November by 25% and from the same month in 2015 by 19%. Price level increase deduced from the annual emotional purchases at the end of the year, where the Christmas month is characterised by a price level increase both on the residential and the apartment market.

 

In the neighbouring areas of Tallinn, 67 improved residential land transactions were made in December 2016. Compared to November, the number of transactions increased by 60% and from December 2015 by 26%. In the neighbouring areas, the calculated average transaction price was 147,000 euros, which had increased from November by 35% and from the same month in 2015 by 19%. Growth in the number of transactions deduced mainly from the transactions done in Saue, Rae and Viimsi municipality, and price level growth from the transactions in Saue, Saku and Rae municipality. In areas with developed infrastructure, the short-term changes in on price levels have been much more modest than in areas away from the capital, which is due to new residential areas.

 

Tallinn residential market in terms of areas

Viewing Tallinn city and its neighbouring areas as an economic whole, the largest share of improved residential land transactions is formed by Tallinn town. Within the capital, the majority of transactions are made in Haabersti, Pirita, Nõmme and Kristiine district with the most residential areas and where there are the most suitable areas preferred by purchasers. There are more residential areas in north Tallinn, city centre and Mustamäe, but the number of transactions done in these areas is rather low.

 

The residential market of Tallinn and its neighbouring areas forms the most active complete area in terms of the real estate market in Harjumaa. In areas close to the city, interest for residential buildings and terraced house boxes is growing. The more you move to areas with little population, the smaller is the share on the apartment market. In terms of municipalities, the most preferred areas are close to major roads leading outside the capital, naturally beautiful places and municipality centres.

 

In areas close to Tallinn, somewhat more transactions are done than in Tallinn individually. These areas are mainly the small towns and villages in Viimsi, Harku, Saue, Saku and Rae that are characterised by the constant growth of population and construction activity. Besides single dwellings, a widespread trend here is construction of single family and terraced house boxes, the market of which behaves similarly to the residential market. Terraced house and semi-detached house plots are usually smaller and thus with more privacy, thus the prices are somewhat lower compared to single family dwellings.

 

Regional specificities of the residential market and consumption preferences

Both in Tallinn and neighbouring municipalities, stone construction buildings and buildings with modern heating solutions are looked for (electricity and liquid heating are the least valued), the closed net area of which is between 150-200 m2. In a situation where incomes have grown and the general state of welfare is high buildings in a good state are usually looked for, where you can move in immediately. New developments with a spacious plan, functionality, developed infrastructure and low utilities are preferred.

 

The prices of buildings in need of renovation start in Tallinn from about 150,000 euros. The sales offers and transactions of dwellings in a good state are usually between 180,000 – 250,000 euros. In Nõmme, Pirita, Viimsi and other more exclusive areas, the dwellings are much more expensive. The price of dwellings in a very good state starts usually from 300,000 euros. New developments cost usually 300,000 - 500,000 euros. Very exclusive dwellings in a good location can cost more than million euros.

 

According to Arco Vara, the typical house purchaser in Tallinn or its neighbouring area is a young family with one up to three children. As for suitable offers, consumers’ selection depends on the household income and thus loan capacity. The price levels of dwellings are higher in Tallinn and in areas close to the sea and the city; when moving away from the capital toward the inland, the prices are getting cheaper due to the distance.

 

Offer and demand dynamics

In 2016, 346 improved residential land transactions were made in Tallinn, which is by 9,4% less than in 2015. In terms of the transactions, the arithmetic average transaction price was 247,000 euros and median price 191,000 euros, which increased from previous year by 17% and 8,1%. In Tallinn neighbouring areas, 632 transactions were made, which was by 7,5% less than in 2015. In the neighbouring areas, the average transaction price was 131,000 euros, which increased by 14% from 2015. The number of transactions has been on a somewhat lower level than in earlier years, but the transaction prices have increased quicker than in previous years, this above all periodically in Tallinn.

 

On the residential market of Harjumaa, the price levels have grown in a stable rhythm in the last years. Differently from the apartment market, the number of offers on the residential market has remained rather unchanged since 2014. In this year, the number of offers of dwellings in Harjumaa has somewhat decreased from August to December. Based on short-term statistics, both offer-based price levels and actual transaction prices have increased. During a longer period, the number of offers in Tallinn has decreased more than in Harju county as a whole, which is due to the purchasers’ preference to live above all in the capital or its immediate vicinity and also due to the small additions in offers within the city.

 

Consumers prefer new developments and when buying a place to live the suitable property is initially looked among property with higher price; purchasers’ confidence and the requirements set to a dwelling remain high. In Harjumaa, most new developments were created to areas in direct vicinity of Tallinn. New development areas are constantly arising when moving away from Tallinn, because in the most preferred regions close to the city suitable plots are coming to an end, depending on the area.

This has been most of all promoted by the changed financing of development activities following the financial crisis and thus property developers’ low interest for planning and developing of residential areas with a complete infrastructure.

 

The average sales time of improved residential land that corresponds to the price and quality expectations is about 8 months and for unimproved residential land up to 12 months, depending on the location and equipment with communications. Based on the statistics of Arco Vara, the average sales period of single-family dwellings, summer houses, semi-detached houses and terraced house boxes in 2016 in Tallinn and its neighbouring areas was 210 days. In areas close to Tallinn with developed infrastructure, the demand for improved and unimproved residential land exceeds the offers; thus, the offer and transaction prices are also higher differently from other areas.

 

For building of an individual dwelling, a year is usually spent in case of constant construction. The big change in the number of construction and usage permits may depend on the fact that absence of usage permit does not hinder using the dwelling but its sale (if the purchaser wants to finance the purchase with a bank loan). As single-family dwellings are usually built for oneself, not for sale, many dwellings receive the usage permit with some temporal shift.

 

Forecasts

Residential building market is little active when compared to apartment market, thus based on short-term statistics, more important long-term conclusions cannot be made. Occasional statistical price differences depend on transactions with single very high or low transaction prices. Residential market has also price levels in terms of which the purchasers are ready to make concessions in price, thus when reaching the real transaction, the prices of offers and transactions differ usually up to 10%. (based on Arco Vara statistics, in Tallinn and its neighbouring areas in 2016 on the average of 4% a year).

 

After the construction legislation that entered into force on 1 July 2015 residential building market has become more complicated as for Estonian real estate market. When purchasing with a bank loan, the credit institutions require that the documentation related to the dwelling is correct (incl. construction and usage permits, construction project and in case of smaller changes also construction notice/usage notice). Above all illegal buildings need legalisation; this happens mainly with older immovables where several outbuildings have been also built to the yard besides the dwelling.

 

In addition to available documentation and its importance access to the properties from public roads is also important. Property appraisers encounter many properties for which access from a public road has not been ensured. Until there is no access through a legal servitute, banks do not usually agree to finance the purchase.

Leaving aside the restrictions of commercial banks for enlivening of the residential market, no major changes are expected on the residential building market of Tallinn and its neighbouring areas in the near future. Dwellings are searched and purchased mainly by households that earn more than the average and whose social and economic welfare remains positive according to forecasts in the near future. In a situation where construction prices and the number of dwelling sales offers remain high one cannot expect shortening of sales periods or price levels. Statistical average price levels will be mainly influenced by new developments and transactions with more expensive price levels regarding secondary market objects.

 

Due to the high price level consumers can choose between apartment and residential building market – for a bigger apartment bought to Tallinn city you can purchase for the same amount a residential dwelling close to the city. Thus, growth in price levels will be supported above all by consumers who buy residential buildings as an alternative to apartments as well as the constant decline in the number of offers in Tallinn city during the last years. According to estimates from Arco Vara, the prices of residential buildings in more demanded areas and plans can rise somewhat, but shortening of the sales period of more expensive residential buildings cannot be expected.

 

In Q1 2017, the annual decrease in the number of transactions can be expected due to the seasonal nature of the real estate market, where some moments of decline could be also noticed in the shaping of price levels. Average prices will be retained by both new developments and more expensive secondary market residential buildings but also by the current high prices for offers. In Q1, some addition to the offers of residential buildings was expected due to the seasonal nature of the market, which was mainly due to the fact that in winter, the interest for acquiring real estate and the number of transactions decrease.

 

[1] The neighbouring areas of Tallinn are in this market overview treated as the most active areas in terms of transaction activity close to Tallinn – these areas are hereby Harku, Saue, Saku, Rae, Viimsi municipalities and Maardu town

 

Tallinn

Tallinn, Rävala pst 5, 10143+372 614 4600 info@arcovara.ee

Tartu esindus

Tartu, Soola 8, 51013+372 744 2218 tartu@arcovara.ee

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Pärnu, Rüütli 47, 80010+372 447 1430 parnu@arcovara.ee

Viljandi esindus

Viljandi, Lossi 18, 71003+372 435 9969 viljandi@arcovara.ee

Rakvere esindus

Rakvere, Laada 14, 44310+372 324 0888 rakvere@arcovara.ee

Põlva esindaja(d)

Jõhvi esindus

Jõhvi, Rakvere 16, 41532+372 337 0400 johvi@arcovara.ee

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Kuressaare esindus

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+372 512 4236 paide@arcovara.ee

Võru esindaja(d)

Hiiumaa esindaja (d)

Põltsamaa esindaja (d)

Valga esindaja (d)

Jõgeva esindaja (d)

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