Construction, Estonia, Real Estate
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Saturday, 27.04.2024, 07:02
Estonian realtor: construction sector boom affecting entire property market
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"The effect from an almost 20% rise in construction prices and
problems with finding skilled labor has become so profound that it is having a
direct impact on the real estate sector, as all business plans just don't work
any more," Elar Udam, manager
of Pindi Kinnisvara, said on Friday.
He said that as a result, the development of apartment houses with more
favorable prices per square meter is being postponed and the construction of
private homes is coming to a standstill.
"If the supply of favorably priced new apartments in the suburbs falls
below the critical limit, the direct effect from this will be skyrocketing
prices for aftermarket apartments, which definitely is not good news given the
current relative stability of the market. This, in its turn, will take the
selling prices of other apartments higher, and that's how waves of increase are
created," Udam said.
Udam described the termination of contracts as a second major problem.
"It depends which of the sides has stronger nerves, but there have been
requests to terminate from both sides. On the one hand it's when the
contracting party feels that he is unable to fulfill the promises, and on the
other hand when the builder feels that the construction contract concluded a
year ago is too constrictive under today's conditions and it's cheaper to pay
the fine for termination than to take the torture of carrying on at all
costs," he said.
As at the end of November, 115 apartment house development projects with
2,453 apartments were underway in Tallinn and Harju County. In Tallinn, new
apartments are built mainly in the more expensive districts of Central Tallinn
and North Tallinn.
Peep Sooman, selling partner at Pindi, said
that even though there's tight competition on the market for new apartments,
more and more projects are being started in Central Tallinn and North Tallinn
and fewer in the more favorable regions where a new apartment could be afforded
also by young families.
"The number of offers in the suburbs is quietly beginning to
dwindle because profit margins have become dangerously narrow due to high
construction prices," Sooman said.
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