Real estate portal KV.ee’s index of property prices in Estonia seems to be on a horizontal plane at the moment, according to Tõnu Toompark’s Adaur blog. The Index currently stands at 61.9 points, 1.7 per cent lower than this time last year.
However, in view of an inflation rate that exceeds the 5 per cent mark, the true figure for average real estate prices in Estonia is even less than this level would suggest.
The index doesn’t seem to have risen in accordance with the arrival of the Euro. Rather, the very arrival of the Euro seems to have cut the number of transactions and brought the housing market to something of a standstill, writes Tõnu.
The number of bids according to the KV.ee portal increased steadily from the beginning of last year until the autumn. At its peak in September 2010, the portal reported 20 500 residential bids. Thereafter there was a brief decline in the number of offers until the new year, when they gradually started to pick up again. These were largely constituted by those sellers who were anticipating higher prices with the arrival of the Euro and so held off putting their properties on the market until then, but the trend was affected by a shrinking number of transactions in January and February 2011 due to the seasonally slowing market.
The current number of residential offers on KV.ee stands at 19 500, or 11 per cent more than a year ago.
To sum up, it is only a matter of time until the decline in residential prices in smaller regional areas stops. When this happens, the KV.ee index should start to rise again. Thus the fall in offer prices is sure to finish in due course, as the effect of higher transaction prices kicks in.
The KV.ee index, which commenced on 18 February, 2008 (i.e. this is the date on which the value of the index is calibrated at 100) measures the week on week change in residential real estate prices in Estonia. The data has been measured back anachronistically to 1 January, 2005, when the index stood at an “all time” low of 49.9. The “all time” high came on 7 May, 2007, when it stood at 108. Following the economic downturn of 2008 onwards, the index reached a low point (to date) of 61.4 on two occasions, on 5 September and 27 October, 2010.
Tõnu’s original article (in Estonian) is available here.