Time to buy a flat in Tallinn?

Article published on Aug. 1, 2008
Article published on Aug. 1, 2008
In Lasnamäe, not the richest part of the capital, the report is even worse (or better if you had bought a flat here in 2000 or before) with a 480% increase during the same period and reaching 24 000EEK/m² in 2006. Since then the market has been going down to the 2006 price level. For companies it looks like this was a huge crash whereas it seems a very small thing for the potential buyer.
Have you really seen big price discounts? Well, not me! We hear and read everywhere that some real estate developers and companies offer a 20 to 30% price discount but apparently most of them have only decided to slightly reduce their prices but are ready to accept lower offers, up to 30% once again. I did not try it myself, this is only hearsay.

What is for sure is that the number of sales is decreasing dramatically and companies do it all to sell their empty buildings. On the famous City24 website, you can even find rock-bottom prices as some flats are sold for 1000 EEK! Obviously that is a fraudulent price as it is only made up to « attract » and mislead the consumer. That is the reason why the Estonian Consumer Protection Authority started to look at it.

Funny stuff like this put aside, the smallest and weakest real estate companies have already gone bankrupt and hence the purge has started. It will hopefully only have the effect to leave the best and most professional real estate brokers. Indeed it seems that everybody used to be able to be part of the business. I recently remember a comment from BBN asking if « being a real estate broker is a work or a sort of hobby in Estonia? »

The crisis of the sector is obviously affecting the whole economy: construction first as many flats are still empty and so the supply is higher than the demand, but then all the activities which are revolving around real estate such as bathroom, kitchens, furniture…

The main question is today, for someone looking for a flat at a normal price taking into account the level of revenue, is should I buy now ?

That is a thorny question since it all depends where and what you want to buy. However, some companies are already quite desperate and are ready to accept offers with a 20 to 30% discount.

Given the economic environment, and the running inflation, it is not very probable that Estonians re-start spending more and buy flats suddenly. Furthermore, some other companies are still stubborn and have kept the same since the beginning of this year, advertising everyday more and more, creating some clients’ days in the middle of the week (laugh...)... well working hard and spending money for little results when a decrease in the price would be perhaps more rewarding.

Anyway my point is that people should wait a bit more, until the beginning of autumn. Check around the flats available, and wait for companies to be really desperate. The other easy way is to make offers at a price you would feel confident with. You will see what the broker says. Well usually they do not say anything, they do not even answer your emails and that might be one reason of the crisis. Brokers just cannot sell!

So, is the light at the end of the tunnel for real estate? Not yet for sure but let’s see what happens and « wake me up when September ends ». Always keep in mind what happened in Sweden in the 90s and believe that prices can drop by 30% within a week!