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Overview of residential building market in Harju county (as at the end of December 2016)

 

In Harju county, most transactions with improved residential land are made outside the capital in areas close to Tallinn, where there are the most residential regions. Viimsi and Harku municipality stand out in terms of transaction activity. Purchasers’ preferences are the highest for up to 20 km outside of Tallinn that can be also considered the zone of going to work to Tallinn. Outside the municipalities close to Tallinn and the close areas to the county’s bigger centres, interest has remained modest. Differently from transactions done in Tallinn, the transactions in the neighbouring areas concern mostly new developments.

 

Price and transaction activity growth in Q4 was mainly led by new developments

Due to the seasonal nature of the real estate market, it became more active in Estonian larger areas in Q3 in August and September. In Q4, transaction activity started to decrease quickly, both compared to previous months and the same time last year. December turned out to be somewhat more active like in previous years, raising the price levels much higher in the Christmas month. The real estate market of the autumn supported by the weather conditions and Christmas expectation kept the interest high. On residential market, the sellers’ price wishes and purchasers’ preferences have remained rather similar to the previous quarters. Above all, the price wishes of new development offerers have increased like the demand for new developments. According to Arco Vara, there are sufficient offers on the market to meet the demand.

 

In Q4 2016, 22% less transactions were done with improved residential land in Harju county as a whole 22% than in Q3. The arithmetic average of transaction prices was 145,000 euros and median price 135,000 euros. Arithmetic average increased by 7,8% and median price even by 42%. Compared to Q4 2015, transaction activity increased only by 1,8%, arithmetic average transaction price increased by 12% and median price by 35%. Residential market indicators have remained largely unchanged; transaction activity has remained rather on the same level as earlier periods due to seasonality.  The growth of transaction activity and price level has occurred mainly in the capital and areas close to it with reference to new developments.

 

In December, a total of 125 improved residential land transactions were done in Harju county as a whole. Compared to November, the number of transactions had increased by 17% and compared to the same time in 2015 by 5,0%. The arithmetic average transaction price was 160,000 euros and median price 153,000 euros. Arithmetic average increased from November by 17% and by 10% from December 2015. Median price increased from November by 28% and compared to the same time in 2015 by 19%. The quick growth of both the median price and arithmetic average had significantly increased compared to previous periods. The number of transactions has constantly decreased since the summer of 2016, but the price level has strongly grown on the account of more expensive secondary market and new developments.

 

Harju county residential building market by municipalities

Harju county’s residential building market is formed mostly by more active areas in real estate market, of which the most important part form towns led by Tallinn and then municipalities close to the capital. Differently from the apartment market of Harju county, the residential market is somewhat more active when moving away from the capital; in areas where apartment s are not sought, it is easier to find a buyer to residential buildings. Among municipalities, the most preferred are these close to the roads leading out of Tallinn or close to the municipality centres.

 

Regional transactions’ number and price dynamics in Harju county municipalities in Q3 2016

Municipality *

Median transaction price

Change of median compared to last quarter

Change of median compared to the same time last year

Change in transaction number compared to previous quarter

Change in transaction number compared to the same time last year

Anija

25 000

25,0%

- **

0,0%

175,0%

Harku

65 000

-18,5%

-12,8%

-38,9%

-21,4%

Jõelähtme

110 000

91,3%

29,4%

-18,8%

-13,3%

Keila

52 500

20,8%

5,0%

-57,1%

-42,9%

Kernu

24 000

20,3%

50,0%

-22,7%

0,0%

Kiili

112 000

69,1%

-17,0%

10,0%

46,7%

Kose

135 000

320,2%

64,6%

-33,3%

20,0%

Kuusalu

65 000

62,5%

-29,5%

-23,1%

0,0%

Rae

213 950

20,9%

22,3%

16,7%

16,7%

Saku

69 000

-8,0%

15,0%

-27,6%

23,5%

Saue

186 018

77,2%

431,5%

100,0%

84,6%

Viimsi

153 388

20,0%

4,0%

-34,1%

-35,7%

* Municipalities where less than 5 transactions with improved residential land were conducted are not included in the table

** too few transactions were done in the area and thus have not been included here

Source: Land Board, transaction database

 

In term of Harju county municipalities, the most active areas are the municipalities close to Tallinn. These are Harku, Viimsi, Rae and Saue municipality that are all characterised by urbanisation due to the closeness of Tallinn and high activity of construction activity. The buildings concerned in these areas are usually new developments. When distancing somewhat from Tallinn, the most active areas are Saku, Kernu, Keila, Kiili and Jõelähtme municipality.

 

As for the number of transactions and median price in municipalities, more thorough conclusions cannot be made differently from the above mentioned areas, since regional transaction activity is too low to report forming trends.

 

Harju county’s residential market regarding towns

As for towns in Harju county, besides Tallinn, Maardu town is also active in terms of residential and apartment market; this is due to the town size and the immediate closeness of Tallinn. In other towns in Harju county, the general real estate market and residential market are rather little active compared to Tallinn town and its neighbouring areas. The residential market of small towns in Harju county is formed by residential buildings built in 1940-1990; new developments are mainly from 2011-2016.

 

Regional transaction number and price dynamics in Harju county towns in Q4 2016

Town *

Median transaction price

Change of median compared to last quarter (%)

Change of median compared to the same time last year (%)

Change in transaction number compared to previous quarter (%)

Change in transaction number compared to the same time last year (%)

Keila town

97 500

-27,8%

-27,8%

-45,5%

20,0%

Maardu town

55 000

-8,3%

25,0%

-10,5%

-32,0%

Tallinn

198 500

9,1%

10,3%

-15,2%

-20,8%

* Municipalities where less than 5 transactions with improved residential land were conducted are not included in the table

** too few transactions were done in the area and thus have not been included here

Source: Land Board, transaction database

 

In Q4 2016, transaction activity and price levels in the small towns in Harju county remained without major changes compared to earlier periods. As for small towns in Harju county thorough conclusions cannot be made due to short-term statistics, since the regional transaction activity is too low to report major trends. The number of transactions has started to decrease in Tallinn and the small towns in Harju county; the constant growth in price level can be thereby seen only in the capital.

 

Regional specificities of the residential market and consumer preferences

As for Harju county the most preferred areas outside Tallinn are above all naturally beautiful and private locations. The most preferred areas are in Harku and Viimsi municipality, thus the closeness of the sea and Tallinn are preferred. The price levels of areas close to Tallinn and also naturally beautiful are rather similar to the residential building prices close to its neighbouring areas.

 

The high season for purchasing unimproved residential land and buildings in need of renovation is above all in spring and summer. In spring, more ready buildings or buildings in need of renovation are searched in order to move in immediately or finalise the construction works during summer. As for purchases of unimproved residential land, autumn is more likely time, as starting construction works takes usually more time due to documentation after which the works can be started in spring.

 

For purchasers of residential or unimproved residential land, the region’s structure and state of roads and street network is most important. In areas with no complete infrastructure the plots are still of low liquidity following the once-time boom period. Interest for half-finished buildings has also decreased due to the high share of buildings that are ready or suitable for moving in. People are ready to pay higher price only for higher construction quality, internal finishing in a good state or a spacious plan.

 

Both in Tallinn and its neighbouring municipalities, residential buildings in a stone construction and with modern heating solutions are searched (electricity and liquid heating are the least valued), the closed net area of which is between 150-200 m2. In a state where incomes have steadily grown and general level of welfare is high residential buildings in a good state and ready for moving in are sought. New developments with a spacious plan, functionality, developed infrastructure and low utilities are preferred.

 

The prices of residential buildings that need renovation start in Harju county usually from 50,000 euros. The sales offers and transactions of residential buildings in a good state are usually between 80,000 – 130,000 euros. The price level of residential buildings in a very good state is between, 130,000 – 200,000 euros. The price level of summer houses close to Tallinn is usually between 25,000 – 50,000 euros depending on the state and location of the building. Summer house prices are mainly influenced by waterbodies close by and the state of the living condition.

 

Arco Vara estimates that the typical house purchaser in Tallinn or its neighbouring areas is a young family with one to three children. In terms of suitable offers, the choice depends on the household income and thus loan capacity. The price levels of residential buildings are usually higher in Tallinn and its neighbouring areas by the sea; when moving away from the capital toward the inland, the prices are becoming cheaper due to the distance.

 

Offer-demand dynamics

In 2016, 3.8% less transactions were made with improved residential land in Harju county compared to  2015, while the median price increased by 16% and arithmetic average transaction price by 11%. The number of transactions has been on the same level for several years, but considering the higher transaction prices, the average price levels have increased.

 

Differently from the apartment market, the number of offers on the residential market has remained rather unchanged since 2014. In 2016, the number of offers in Harju county decreased somewhat from August to December; in 2016 as a whole, the number of offers decreased by 2,5%. Based on short-term statistics, offer-based price levels have increased; real transaction prices have grown constantly compared to previous periods only in the neighbouring areas of Tallinn. Residential market is characterised by the seasonal decline in the number of offers in autumn and spring.

 

Consumers prefer new developments and when buying a property, selection is first made among properties with higher price; the purchasers’ confidence and requirements on housing remain high. As for Harju county, most new developments are built to areas in the immediate vicinity of Tallinn. These areas are the small towns and villages located mainly in Viimsi, Harku, Saue, Saku and Rae municipality and characterised by constant population growth. New development areas constantly arise for new developments when distancing from Tallinn, because suitable plots close to the city in more preferred areas are decreasing.

 

Construction of an individual dwelling takes usually a year. The big difference in the number of construction and usage permits can depend on the fact that the absence of a usage permit does not hinder the putting into use of a dwelling but instead the sales process (if the purchaser wants to finance it with a bank loan). As single-family dwellings are usually built for oneself, not for sale, many dwellings receive usage permit with a temporal shift.

 

Forecasts

Compared to apartment market, residential building market is rather little active; thus, conclusions cannot be made for a longer perspective based on short-term statistics. Some statistic price changes depend on the transactions done with single very high or low prices. The residential market has also price levels for which sellers are ready to negotiate the price; thus, when reaching the actual transaction, offer and transaction prices usually differ by up to 10% (based on statistics of Arco Vara, on the average 6,3%).

 

After the construction legislation that entered into force on 1 July 2015 residential building market has become more complicated as for Estonian real estate market. When purchasing with a bank loan, the credit institutions require that the documentation related to the dwelling is correct (incl. construction and usage permits, construction project and in case of smaller changes also construction notice/usage notice). Above all illegal buildings need legalisation; this happens mainly with older immovables where several outbuildings have been also built to the yard besides the dwelling.

 

In addition to available documentation and its importance access to the properties from public roads is also important. Property appraisers encounter many properties for which access from a public road has not been ensured. Until there is no access through a legal servitute, banks do not usually agree to finance the purchase.

 

Leaving aside the restrictions of commercial banks for enlivening of the residential market, no major changes are expected on the residential building market of Tallinn and its neighbouring areas in the near future. Dwellings are searched and purchased mainly by households that earn more than the average and whose social and economic welfare remains positive according to forecasts in the near future. In a situation where construction prices and the number of dwelling sales offers remain high one cannot expect shortening of sales periods or price levels. Based on the statistics of Arco Vara, the average sales period of the single-family dwellings, semi-detached houses and terraced house boxes in Harju county has been 210 days in 2016.

 

According to estimates from Arco Vara, the prices of residential buildings in more demanded areas and plans can rise somewhat, but shortening of the sales period of more expensive residential buildings cannot be expected. In Q1 2017, some decline can be expected in the transaction activity due to the season and thus some addition of offers. On the background of the large share of transactions with new developments, the average price level is estimated to be on the same level as in previous months.