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Swedbank Analysis 23 March 2010 The Future of the Estonian Residential Real Estate Market

Swedbank Analysis 2010 Future Estonian RE Market

Swedbank Analysis 23 March 2010 The Future of the Estonian Residential Real Estate Market

The Future of the Estonian Residential Real Estate Market

  • The Estonian residential real estate market is showing signs of stabilisation and slow recovery, at least in the Tallinn region. But this will not be the prelude for robust growth. The growth of the market will remain weak for several years, if not for the next decade, despite the strong need for new and/or renovated residential real estate. Weak demand
    is the major obstacle for growth, and this weak demand stems from modest incomes and the high debt level, accompanied by cautious lending and borrowing.
  • Demand growth will remain somewhat subdued even after five-seven years, when we expect wages and incomes to grow faster due to demographic factors, as the high debt level will persist and caution will be greater than five years earlier.
  • Developments in the real estate market will be uneven due to a structural disharmony between demand and supply. We foresee a simultaneous growth and decline in activity and prices, depending on the type of real estate, and setbacks are likely as well. The development of the rental market in the long term is important for improving the living
    conditions of people having average or below-average incomes. But this development will be dependent on the enactment of better legislation.

The real estate boom, which started in the spring of 2003, ended in the spring of 2007. The market took a second hit when the global financial crises erupted in September 2008. As of now, stabilisation and slight growth have emerged in the Estonian real estate market, especially in the Tallinn region. However, there are several reasons to claim that strong growth will not return in the next few years and, most likely, not even in the next decade. The weak demand is a major hindrance. This report examines the growth prospects of the residential real estate market (henceforth referred to as the “real estate market”) during the next decade.

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Issued by SWEDBANK / Published to the Site www.naibaltics.com by NAI Baltics – commercial real estate services in Latvia, Lithuania, Estonia. Your trustworthy partner, advisor and consultant in the Baltics and Worldwide. http://www.naibaltics.com

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Valdis Gailitis
Member of the Board
Dommo group (grupa)

Commercial Real Estate

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