Estonia Investment Growth

Find out below the main reasons why real estate in Estonia still has such potential for investment growth.

Investment property in Estonia is a popular option amongst buyers seeking a growing and reliable EU market in which to invest.

A short supply of modern accommodation both in Tallinn city and in seaside resorts such as Parnu is keeping the property market ever buoyant in Estonia, while an emerging wealthy middle-class is now keen to get onto the property ladder for the first time. The greater availability of mortgage finance means a further boost to the market as increased local demand for property should, inevitably, contribute to pushing prices upwards.

Finnish investors dominate overseas buyer statistics as geographic proximity and the prospect of buying property at prices 300% lower than in Helsinki make Estonia an ideal choice for Fins seeking affordable and profitable investments.

The Estonian investment climate is clearly conducive to growth: zero and low corporate taxation rates, a low cost of living and a skilled local workforce have resulted in consistently high levels of foreign investment. A sophisticated workforce, including specialists in the IT, transportation and construction sectors, indicates that Estonia will continue to grow for some time to come.

A wide availability of budget services, such as Easyjet from London and Berlin and the introduction of new routes such as KLM’s twice daily flights to Amsterdam continue to boost international visitor numbers to Estonia, encouraging demand for holiday homes and investment properties.

Capital Appreciation

Current capital appreciation figures are an encouraging 12% per annum, making for profitable medium to long term investment in Estonia’s sought after locations. Although this rate is not as high as in recent years, current economic indications demonstrate a smoothing off to more sustainable levels, comparing very well with growth in many other EU countries.

Rental Yields

2007 rental yields reached approximately 6% for new apartments in high demand areas of Tallinn city centre, boding well for buy-to-let investors or those looking to rent out their properties to supplement capital appreciation over time. With prices around 10 EUR per metre squared, renters are foreign workers and, increasingly, the Estonian population.

Estonia Economy

Estonia receives the second highest per capita EU cash inflow of all nine acceding countries. A growing economy, consistently averaging between 6% and 11% over the last five years, brings with it increased personal incomes and boost to the property market. Assuming growth rates average a 7% per annum, Estonia’s economy will in turn grow by a significant 40% over a five year period, leading to significant capital appreciation over time.

Reasons Why Estonia is an Intelligent Property Investment Location

  • Low levels of unemployment, wage increases, and rapid economic growth have led to an increasingly sophisticated and wealthy population in Estonia. More Estonians now seek to jump onto the property ladder for the first time since Soviet days, by owning their own modern style homes
  • Despite boom days during and since EU accession, demand for property remains high and supply low, particularly in major town centres. Many experts predict it will still be some 10 to 20 years before supply finally meets demand
  • Prices still compare extremely favourably with other European countries: in Tallin centre, a new flat (50m2) can still be bought for approx GBP 66,000
  • Approx. capital appreciation of 12.5% per annum. Over the past 11 years, prices have risen consistently by, on average, 10 - 15% per annum
  • Apartments in the city centre are renting well, mostly to foreign workers, but also to affluent Estonians, at approximately 10 EUR per square metre, and yielding some 6% per annum
  • Estonia receives huge amounts of foreign investment, particularly from neighbouring Finnish investors, who seek affordable properties in Tallinn, in preference to higher prices back home in Helsinki. In time, this is likely to result in converging property prices between the two capitals
  • GDP growth rates have stabilised and are expected to average 7% per annum, in turn having a positive effect on property price growth over time
  • Home mortgages are increasingly available to local buyers, meaning more scope for many ordinary citizens to finance a property purchase
  • The impending introduction of the Euro, set for approximately 2010, means that many people with cash are investing in tangible assets such as property. In the run up to the Euro, this has been a common trend in other countries such as Spain and Portugal, that also saw significant price rises since adopting the Euro
  • Easy access is ensured via Tallinn’s recently upgraded international airport. Many low cost airlines service Tallinn from major European cities, and new Estonian Air routes are scheduled for spring 2008

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