Mixed Signals for Property in Estonia in 2007

There is significant division of opinion over which direction property in Estonia will take in 2007 with some analysts convinced that it will continue to represent an excellent investment opportunity and others warning of a soft landing ensuing – so it’s mixed signals for property in Estonia in 2007 and we present both sides of the argument.

On the positive side Estonia is proving to be an economic success story…the nation has adopted a flat tax rate, welcomed strong inward foreign direct investment, established strong trading ties with the likes of Sweden and Finland and grown rapidly as a result.  Unemployment has dropped dramatically from around 10% to in the region of 5% today, Estonian people are intrinsically wealthier and their access to mortgages and loans has matured so that according to the European Mortgage Federation, the mortgage market in Estonia has grown by an impressive 80% and more Estonians own their own home than ever before.

It is forecast that in 2007 per capita GDP in Estonia as measured using the purchasing power parity method will reach a par with Portugal and equal around 70% of the EU average.

All of this positive data suggests that not only is there desire for property for sale in Estonia from the local population but there is affordability in the market as well which is supported by an increasingly affluent and employed market which has access to decent real estate finance.  Demand and affordability are essential components for potential property price expansion which is ultimately what property investors seek!

Another positive angle to examine is that travel and tourism traffic in Estonia is on the increase; the World Travel and Tourism Council estimate that GDP contributions from this side of the nation’s economy could top 16% next year and that the travel and tourism sector could grow by 6.7% a year for the next nine years.  All in all the WTTC expect Estonia to reach position 14 in the world in terms of its long term growth potential meaning that there is another side to ‘demand’ for property for an investor to target in Estonia.

On the negative side however, expected increases in interest rates in 2007 will negatively affect the affordability for Estonians and also lower their appetite for personal financial over-exposure which could limit the market an investor has to target with property assets.  Furthermore there are problems brewing in the construction industry that could inflate property prices and restrict overall market activity.  A lack of labour together with the fact that construction materials and land are getting costlier means that it is becoming more expensive to build housing in Estonia…

So, what conclusions can be drawn from this vastly divergent data? 

Well, it’s probably fair to say that 2007 will not return any significant increases in capital gains for an investor – but because demand exists from both the local and the tourism markets in Estonia and because the nation is economically and politically strong, property investments made in Estonia in 2007 will represent good medium to long term capital appreciating assets and offer an investor the chance to tap into immediate rental demand from both the growing tourism market and a local market not willing or able to expose themselves directly to property at this moment in time.

Special Reports: Property News for Estonia

Estonia a Guide for Property Investors
Property prices in Estonia are growing steadily; international real estate investors are attracted to long term market growth potential.

Estonia Investment Property Buying Process
The process to buy investment property in Estonia is incredibly simple, straight forward and inexpensive - adding to the country's appeal

Estonia Property Investment Guide
Immediate property investment opportunity in Estonia is limited to Tallinn but long term prospects exist elsewhere.