Real estate market 2009: common sense

This year was a turning point on the Estonian real estate market. Those who survived 2009 on the real estate market got a very expensive lesson that highlighted the need for common sense, writes real estate analyst Tõnu Toompark.

Negative factors in 2009:

1) high unemployment and related low consumer confidence
2) outstanding balance and turnover of housing loans are shrinking
3) prices have fallen notably

Positive factors in 2009:

1) number of real estate transactions is growing
2) investors have become more active on the market
3) large developers have announced or are announcing new projects
4) positive signals from banks to offer better loan terms

According to Toompark, we have learned from this year that the economy is developing cyclically. Anyone who wants to be a player at present must have a token of common sense that helps also the sustain the bad times.

Consumer confidence has been low

Of negative news affecting the real estate market, one should definitely mention rapid growth of unemployment and especially low consumer confidence caused by fear to lose a job. By now there are over 100,000 people unemployed and this is likely to continue growing. Low consumer confidence prohibits people to bind themselves with long-term decisions such as acquisition of real estate.

Fall of loan balance and turnover

Also this has been restricting the market. The outstanding balance of housing loans fell two-thirds in a year in the third quarter 2009. What is clear is that if tehre is less money in the real estate sector, it will be more difficult to reach a transaction. This is reducing demand and pushing prices down.

Real estate prices continue to fall

This has been the keyword in the housing market. Average price of apartment transaction in November 2009 was 30% lower in annual terms. The few buyers on the market have definitely benefited from this trend, but financiers find it hard to sustain such a difficult market.

Number of transactions is going up

There were also positive news in 2009. First, the numebr of apartment transactions has started to increase. There were 2,850 apartment transactions in the third quarter 2009. In comparison, in the first half the figure was 2,070. Another positive news is that investors are back on the market and looking for value or money.

Large developers announce new projects

A very positive sign on the market is that large developers indicate that they are ready to launch new projects on the market. Of large players, Merko said that it will plan to build 110 apartments in 2010. I am confident that there will be others in the first half of 2010 making similar announcements.

Banks send out positive signals

Last, but not least – banks have become much more positive in financing housing and are easing borrowing terms. Although actual lending figures do not yet support it, this is clearly sending a positive signal to the market.

In conclusion, says Toompark, Estonian real estate market seems to have overcome its worst depression; market players are not yet laughing, but are almost smiling and the number of transactions is growing.

Artikli autor on Toomas Hõbemägi. Artikkel ilmus 21/12/20098 väljaandes

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