Updated: Apr 6
Bringing unique investment opportunities front and centre, we explore how this small country in the Baltics offers easy global entry to a thriving real estate market (from 30-50,000 Euro for an apartment in the capital).
Global Investors who act now, could soon benefit from a significant upturn in values and yields. Some even suggest we’re in for a serious boom.
Let’s explore why.
The 10% Population Spike
Following the invasion of the Ukraine by Russian Forces, refugees poured into Europe. Estonia was no exception.
Government sources predict that in addition to the 25,000 Ukrainian refugees that have already arrived in Estonia since the invasion, a further 75,000 are expected shortly.
They desperately need housing.
It’s easy to see why when we put the numbers into context. The population of Estonia currently stands at a little over 1 million people - so that’s an immediate population spike of 10%.. In a matter of months.
So sudden is the influx, and so limited are the spaces to house them, that the Estonian government has announced a variety of short to long term strategies to address the looming housing crises.
Strategies range from temporary hotel accommodation in Tallinn, with government funding for security deposits and advanced rental payments on private accommodation, to a Tallink ferry soon to be moored in Tallinn harbour. The ferry will accommodate as many as 2000 people for up to 12 months.
With little or nothing left to rush back to in the Ukraine when the fighting ceases, the majority of these refugees could well be looking to make Estonia a permanent home.
Many will be drawn to the capital, Tallinn, and other major centres in hopes of work and a fresh start within NATO's boarders.
It's worth remembering that while some refugees arrive without resources, and will benefit from EU government assistance; many are well-educated, previously employed, or in business, and often bring their own capital.
Surging Demand. Limited Supply.
Following basic supply and demand rules, this influx of capital could well signal a significant upward price move in both the purchase and rental markets.
Statistics Estonia, reports that the nationwide dwelling price index increased by 4.8% in 2020 (6% inflation-adjusted), following increases of 8.2% in 2019, 5.7% in 2018, 4.9% in 2017, and 7.7% in 2016. The average price of flats in Tallinn, the country's capital, grew 4.9% in 2020 to €2,124 per square metre (sq. m.).
The Estonian Housing Price Index increased by a further 15.1% on average between 2020 and 2021, the highest rate in 15 years. - newserr
The Index is compiled for apartments and houses (detached, semi-detached, and terraced houses) and indicates changes in the square-meter prices of transactions made by households for the purchase of housing, according to Statistics Estonia.
Despite a drop in foreign purchases due to travel restrictions caused by the pandemic, the overall demand continued to rise.
Estonian Property Sales Increased 28% in 2021
According to the Estonian Land Board, crucially, the number of purchase-sale contracts increased by 28.4% year to year to 18,571 units in the first four months of 2021, following an annual increase of 2.5% in 2020.
The number of purchase-sale contracts in Tallinn increased by 33% year-on-year in 2020
House prices are rising throughout Central and Eastern Europe and while they are still at a very low entry point (from 20-30,000 Euro) compared to larger markets like France and the UK, they are on the rise, making them a great buy to let (rental) investment as well.
We love innovation. We love dirt. When you combine both though I’d suggest, it can be a gold mine.
Estonia has transformed itself in the last 30 years, making many residents extremely wealthy in the process. Technological innovations abound. Robot delivery vehicles share tree lined streets with millennials browsing ancient marketplaces.
Public transport is free for residents and if visiting, you can sign up to any of the new app based car rental services to get around, or jump on an e-scooter for a bit of fun.
Graduates can still buy a flat in Tallinn for under 50,000 Euro and get on the property ladder while they create the next Skype, Bolt, Wirex, Wise or Wolt (all Estonian “unicorn“ startups).
Their parents though may choose to live in a million Euro beachfront apartment nearby, sporting a private sauna, smart home automation and a Nordic design.
One things for sure, uniquely, there’s no “one size fits all” in Estonian property right now. There seems to be something for everyone.
A combination of factors suggest this tiny Baltic nation is one to watch. Whether it’s lifestyle or hi-tech start up‘s drawing them in; or perhaps the rapid migration thanks to Russia, one thing’s for sure - they’re all going to need somewhere to live.
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