Estonian Real Estate Market review, December 2019

December has ended and we have once again a reason to create a yearly summary of the real estate market. On the one part, December was the quietest month of the second half-year (1,783 sales-purchase transactions), on the other part, however, the month with the highest transaction prices (median price 1,558 €/m2).

Estonian Real Estate Market review, December 2019

Thus, the share of new developments was very high, whereas the market was less active during the holiday season. As the Land Board has recorded also transactions under law of obligations contracts for many developments during the past years, it has evened out the large volume of December and distributed the transactions all over the year. 2019 continued the development of the past years – the number of transactions increased by 800 to over 23,000 transactions, which was the highest figure of the decade and virtually the same level as in 2007. The number of transactions decreased in only three counties. The main contributors to the increase in the number of transactions were Harju County (+279 transactions in comparison to year), Ida-Viru County (+176 transactions) and Pärnu County (+94 transactions). It was also positive to see a large increase in the number of transactions in Rapla County (+68 transactions), which indicates the good geographic position of Rapla County next to Harju County, letting the county participate in the rapid development of the real estate market unlike most of Estonia.

The median price of transactions increased by 3.5% in comparison to last year, indicating calmer developments in the real estate market. The median price of transactions was highest in Harju County (1,793 €/m2) where the annual price increase was nearly twice as quick as the average in Estonia (6.5%). The big influence of Harju County on the real estate market is also reflected by the situation where Harju County is the only county with a median price of transactions exceeding the median price of transactions in Estonia. In Tartu County prices increased by 3.7% to 1,374 €/m2. Also Pärnu County crossed the line of 1,000 €/m2 with a price increase of 8%. All the counties contributed to the price increase. The lowest increase could be observed in Ida-Viru and Lääne-Viru Counties where in absolute figures, the median price increased by less than 5 €/m2 in comparison to last year.

Apartment market in Tallinn, 2019

In Tallinn, 846 sales-purchase transactions were concluded in December, which, when looking at the whole year, was inferior to only October and November. That, however, meant a very active last quarter of the year where over 200 more transactions than in the 3rd quarter were concluded. 338 transactions out of the 846 were first-hand sales, which took the share of transactions with new developments to 40%, i.e. the highest figure of the year. The high share influenced the price level; for the first time, the median price of transactions crossed the line of 2,000 €/m2 (i.e. 2,133 €/m2), which was the highest level of all time. The bold 4th quarter meant that in 2019, the median price increased even by 7.3% in comparison to last year, which was caused by increasingly rapid price increase both in the market of new developments and the secondary market. 9,785 sales-purchase transactions of apartment ownerships were concluded in 2019, which was quite similar to the 9,760 transactions in 2017 and the 9,700 transactions in 2018. Such stability suggests that the time for large market growth is behind us, the level of new developments has stayed at the same level (about 30%), whereas the secondary market has remained stable already since 2013. As calmer times are predicted in the economy and the volume of new developments will remain very similar also in 2020, no major changes are to be expected this year.

Apartment market in Tallinn 2019
Apartment market in Tallinn 2019

Apartment market in Tartu, 2019

In comparison to the rest of the year, this December was less active than average. 141 transactions were concluded in December, of which 40 (i.e. over 28%) were transactions with new developments. Such division of transactions raised the median price a little higher than the average level of the year, to 1,473 €/m2. In comparison to last December, both the activity and the price level were rather similar. To sum up, it may be admitted that 2019 was a year of calmer development in Tartu. The number of transactions concluded with new developments was 485, i.e. 58 less than in 2018, but the activity of the secondary market was the highest of the decade, increasing the number of transactions to 2,012, i.e. to the highest level since 2017. The increase in the median price was supported by quick increase in incomes and consumer confidence; the figure was 1,443 €/m2 (i.e. 4.1%) based on the transactions in 2019. Due to the lower share of new developments, the growth in the median price slowed down nearly twice.

Market of apartment ownerships in Tartu, 2019
Market of apartment ownerships in Tartu, 2019

Market of apartment ownerships in Pärnu, 2019

In Pärnu, December was the least active month of the year – 48 sales-purchase transactions were concluded in December, which was 8 transactions less than in January (the least active month of the year that far). In comparison to 2018, the number of transactions even increased in December, the median price figure of transactions, which was extremely high (1,426 €/m2), on the one part indicated the high share of new developments (25%), on the other part, however, also the high transaction prices in the secondary market. The number of new developments in Pärnu has been increasing since 2017. In 2019, 203 transactions (i.e. 23% of the total number of transactions) were concluded in new buildings, which was 66 more than in 2018.  In total, 896 transactions were concluded in 2019, which was the second best figure of the decade, only slightly inferior to the one in 2017. In 2017, the number of new developments was smaller but the secondary market was more active. However, in addition to the larger number of new developments, the median price of transactions, which was 1,244 €/m2 in 2019, indicates a general price increase and improved consumer confidence. In comparison to 2018, the median price of transactions in Pärnu increased even by 8.3%.

Market of apartment ownerships in Pärnu, 2019
Market of apartment ownerships in Pärnu, 2019

Apartment market in Narva

In Narva, December was a rather placid month, as only 53 sales-purchase transactions were concluded. That was some transactions more than in July or August but in the context of year 2019, which as a whole was the most active one of the past decade, December did not stand out too much. 759 transactions were concluded during the year, which was 25 more than in 2017 and 50 more than in 2018. A slight increase in the asking price has also put a stop to the price decrease. However, in one of the poorest municipalities in terms of socio-economic indicators, the past decade in the real estate market has been a “lost decade”. The price level reached the top in 2014 when the median price was 474 €/m2. The price level has been dropping ever since, reaching 391 €/m2 by 2019. The increase in the number of transactions is positive, however, it would also require a price increase in order to reflect positive changes in the market of Narva.

Apartment market in Narva
Apartment market in Narva

Apartment market in county towns

In the wind of the larger markets, also the market of county towns continued to grow in 2019. Of the twelve county towns under observation, the number of transactions only dropped in three towns (Haapsalu, Paide and Põlva) and the median price of transactions in Rakvere. In 2019, the number of transactions was the highest in Jõhvi where 253 transactions were concluded. In comparison to 2018, the number of transactions in Jõhvi increased by 40. 243 transactions were concluded in Rakvere, 242 transactions in Viljandi and 233 in Valga. Next to Jõhvi, the number of transactions increased most in Valga (+25 transactions) and Viljandi (+20 transactions).

Out of county towns, the median price of transactions was the highest in Kuressaare where it increased more than by 100 €/m2 in comparison to year 2018, reaching 955 €/m2. After Kuressaare there was a vast gap, and then at a rather similar level Rapla (776 €/m2), Viljandi (754 €/m2), Haapsalu (740 €/m2) and Rakvere (734 €/m2). The median price of transactions grew most in Võru city where the market was significantly influenced by transactions with new developments, increasing the median price by 124 €/m2 in one year, up to 610 €/m2. The median price in most of the counties remained over 400 €/m2, the price level was lower than elsewhere in Jõgeva (307 €/m2), Jõhvi (223 €/m2) and Valga (136 €/m2).

Market of county towns, 2019
Market of county towns, 2019

Author – Igor Habal, Uus Maa Real Estate Agency analyst