The market did recover in July after a sluggish June. However, given that the economy has been in decline for ten consecutive quarters and confidence in the economic environment remains low, it is difficult to foresee a swift improvement. The situation is further exacerbated by the new government’s coalition agreement, which includes tax increases that are likely to worsen people’s financial stability.
The increase in supply amid weak demand results in longer sales periods and price corrections. Although real estate has become more affordable relative to incomes, many are postponing property decisions until economic conditions improve. This is evidenced by the sharp rise in term deposits, which accounted for 36.1% of household deposits by residents at the end of June, compared to 24.1% in June 2023.
Estonian Apartment Market
In July, there were 1,653 preliminary purchase and sale transactions for apartments across Estonia, nearly 250 more than in June but the same as in July of the previous year. Compared to the same period last year, transactions have decreased by 10.1% in the first seven months. The median transaction price has fallen for the sixth consecutive month, reaching €2,078 per square meter in July, which is 1.3% lower than last year. For the first seven months, the median price was €2,033 per square meter, down 4.3%. Transaction turnover has dropped by nearly 13% year-on-year.
In Tallinn, approximately 700 transactions were recorded, the highest for this year and 8% higher than in July of the previous year. However, activity in the new development market has decreased over the past two months. While public listing data indicated sales would exceed 90 units in April and May, only 70 apartments were sold in June and 77 in July. The increase in secondary market activity, coupled with a median price decrease (to €2,751 per square meter in July, down 5% year-on-year), suggests that buyers are more active in the lower price segments, requiring sellers to lower prices to complete transactions. Exceptions include highly sought-after locations or unique properties, which typically have limited supply.
In comparison, Tartu’s market is performing slightly better. For the first seven months of the year, the number of transactions has decreased by 11%, and turnover by 13% (compared to Tallinn’s 14% and 18% declines). In July, 154 transactions were recorded, similar to April and May and 50 more than in June. The median transaction price was €2,373 per square meter, comparable to July of the previous year. In Tartu, the new development stock is being sold within a year, whereas in Tallinn, it would take over two years at the current sales pace. However, both markets have seen new listings exceed sales since the beginning of the year, leading to increased stock and unfulfilled developer optimism.
The Pärnu market has recovered from its early-year slump, with a slight increase in activity. In July, 58 transactions were completed, matching June’s figures and 14 more than the same time last year. Despite this, the number of transactions has fallen by 28% year-on-year. The contraction in the new development market has led to a 10% drop in the median price for the first seven months of the year, though in July, the median price was 11% higher than the previous year. The number of listings in Pärnu has increased by 46% year-on-year, potentially due to the sale of second homes.
The Narva market shows similar trends to other major cities, with increases in supply, extended sales periods, and declines in transactions and prices. However, since no new development transactions have yet been recorded, market fluctuations are less pronounced. Consequently, transactions have decreased by only 3% and the median price by 3.2% over the first seven months of the year. In July, 60 transactions were completed, with a median price of €490 per square meter, slightly below the year’s average.