February Market Overview – Increase in Listings Leads to Price Adjustment

February Market Overview – Increase in Listings Leads to Price Adjustment

The real estate market continued with a 20-30% lower activity compared to the recent peak in February. As we don’t foresee significant growth in transaction volume this year and the number of listings is on the rise in both the sales and rental markets, we can expect to continue seeing a need for sellers to offer discounts of 5-10% in the sales market and up to 20% in the rental market to facilitate transactions. Additionally, the proportion of new developments in the total number of transactions is decreasing, contributing to a statistical decline in prices. In reality, prices have already dropped by approximately 10% nominally, and due to rapid inflation this year and last, we also anticipate a decrease in real prices.

A significant trend is the increase in listings: in February, according to KV.EE data, there were nearly 3,200 rental apartments offered in Tallinn, which is 17% more than the same period last year. The number of properties listed for sale has increased by 5% over the year, with at least 5,000 apartments now on the market. While the price decline has been modest so far due to strong macroeconomic indicators and favorable financial situations for households, a combination of factors such as anticipated later and smaller increases in interest rates, rapid growth in listings, and overall economic uncertainty could lead to a price correction of up to 5-10%. In a situation where sellers are under pressure, it’s a favorable time for buying or renting.

Apartment Market Shows Few Surprises

The February apartment market was slightly more active than January, with an estimated 1,463 purchase-sale transactions concluded nationwide, exceeding last year’s figures by 3.8%. The median price per square meter decreased by nearly 4% compared to a year ago, remaining at €1,988.

In Tallinn, according to preliminary data, 610 apartments changed ownership (compared to 616 in February last year), with a median price per square meter of €2,707 (compared to €2,827 last year). Both the number of transactions (-1%) and the median price (-2.4%) decreased compared to the previous month, primarily due to an increase in listings amid weaker demand conditions.

In Tartu, based on preliminary data, 100 apartments were sold in January. Compared to a year ago, the number of transactions increased by 10 apartments, with 11 more transactions concluded compared to January. The small share of new apartments is reflected in the decreased median price per square meter, which was €2,217. Compared to February last year, the median price decreased by 16%.

In Pärnu, February was slightly more active than January but remained nearly 45% below the usual level of transactions. 36 transactions were concluded in the second month of the year, compared to 89 in the same period last year. The median price per square meter in Pärnu was €1,757, a 25% decrease compared to a year ago.

In Narva, where the impact of new developments is absent, the activity indicator was relatively better than in other cities. 59 transactions were concluded, 10 more than a year ago, similar to January’s figures. The median price per square meter in Narva was €498, 7% less than the same period last year.

Igor Habal (Uus Maa Real Estate Analyst)