Emotions and money: why the value of real estate in Estonia remains stable

Real Estate Market in Estonia: Price Stability

Despite expectations, the cost of housing in Estonia has decreased slightly by 5-7%, which is lower than the European average. In Germany, the decline reached 10%, in Sweden - up to 15%. This is surprising considering the serious economic downturn in the country.

Estonia's Labor Market Situation

Experts claim that despite a slight increase in unemployment to 8% and a possible rise to 10% due to upcoming layoffs, the overall state of the labor market remains satisfactory. Over the past years, the number of employed individuals has increased by 50,000, reaching approximately 700,000 people. This indicates that, despite challenges, the labor market maintains its stability.

Impact of Central Bank Policies on the Economy

An expert noted that the actions of central banks to raise Euribor rates deliberately slowed down the pace of economic growth and lowered the inflation rate. The economy continues to function, albeit not as vigorously. The current economic situation significantly differs from the 2007-2008 real estate crisis, contributing to market stability and prices.

In Estonia, the percentage of citizens' debt relative to their salaries remains at a level that does not raise concerns compared to other European countries. According to local bank regulations, credit burdens should not exceed half of the borrower's net income. The debt-to-income ratio in the country is around 55%, whereas in the EU, this figure averages 71.5%. In countries like Finland and Germany, this ratio is higher - over 70%, while in Sweden, it exceeds 170%, indicating easier access to loans and a greater credit burden on the population.

Buying Property in Estonia

The majority of buyers (67%) purchase property on credit, while the rest use personal savings.

Impact of the Previous Crisis

After the financial crisis of 2007-2008, both banks and private individuals in Estonia became more cautious about loans. Only 30% of property owners have housing loans, influenced by the Euribor rate increase.

Key Reasons for Housing Price Stability

Since the overall price level increased by 9% last year, and apartment prices rose by 5%, we are essentially witnessing a decrease in real estate prices considering the purchasing power of money. This trend will continue into the current year 2024.