How does global financial crisis affect Estonian real estate market?

The global financial crisis seems to turn into economic crisis. How does that affect small Estonian real estate market? arileht.ee mediates real estate consultant Tõnu Toompark’s opinion.

Financial crisis and downturn of real estate prices mean that every loan kroon sent to real estate market by banks is linked with notable risk – value of property which is guaranteeing the loan is lowering and it’s very complicated to sell when problems occur. So for banks is more reasonable to limit the loan giving.

Roughening the loan conditions is bounding the mass of money moving in the market and therefore cuts the amount of deals even lower. Smaller amount of deals makes prices go even lower.

Economic crisis, which is yet to come, means layoffs for hundreds of people already today. Many have to worry about their job and company, whether they’ll survive tough times.

Economic crisis has larger background to peoples’ daily decisions. When the future is insecure and there is no ray of light, then it’s not reasonable to commit yourself with such a responsibility as is house loan for about twenty years.

So demand on real estate market is continuously diminishing and that can restore not before consumers feel themselves that secure they dare to make decisions which are linked with buying residence.
Confusion in world economy has hit all worlds economic system. It means that there is no hope for recovery in Estonian economy any time soon and loan taps which feed real estate market, will be shut for a long time.

I see no reason for an optimistic mood in near future and expected end of real estate prices falling is pushed further than autumn next year.

Artikkel on 08/10/2008 ilmunud väljaandes Balticbusinessnews.com.

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