Alis Möll, chief financial officer and board member of Pindi Realia Group, told the portal ee24.com where Skype homeland derives strength to restore the Estonian real estate market, why Tallinn is always highly prized and where in the country is possible to buy a home for a mere song.
Estonia - is a small country in Northern Europe, which is distinguished by the high quality of life, favorable environment and a convenient location close to the other Baltic countries, as well as with Russia, Sweden and Finland. It's home to "Skype" and generally one of the leaders in the field of Internet development. No coincidence that in 2005 the world's first elections with Internet voting were held in Estonia.
Estonia is the first and so far the only of the CIS and Baltic countries, which reached the status of a developed economy. The real estate market is recovering quickly and is one of the top gainers in Europe. Last year Tallinn was even named the fastest growing city of the continent in terms of real estate prices. To know more about real estate market in Estonia, the demand from the Russians and the possibility of buying cheap apartments, we talked to Alis Möll, CFO and board member of Pindi Realia Group.
- Tell us about the latest trends in the real estate market in Estonia in 2013. What's happening with prices and with interest of Russian buyers?
- The main line of market development remained the same. Given the geographical features of our country and its proximity to Russia, buying of real estate in Estonia gives a good chance to settle in the seaside city in Europe. Geographical attractiveness remains very relevant today.
Now the Russians are buying Estonian property for families to visit the country on weekends and holidays. However, there are other tasks that Russian buyers solve. Property prices in the country are constantly growing after the crisis, so that the purchase of apartments in Estonia in order to obtain rental income is really attractive opportunity.
The prices are growing an average of 10% a year. And the primary housing, which is more in demand in Estonia, has risen in price significantly. Real estate in the primary market very dependant on foreign demand. And since investors from Russia prefer to buy new housing, prices are rapidly and continuously increasing.
Russians are also buying lowcost apartments in the north-east of Estonia. It's the easy way to get multivisa. But everyone has to understand that we are a northern country, so the upkeep of property is worth €90-150 per month, while you won't be able to live there all year round.
- What's new on commercial property market ?
- Commercial real estate situated on the ground floors is very liquid asset. Buying commercial real estate in Estonia allows to save your money, get a visa and apply for a residence permit for the whole family. Profitability of commercial real estate can reach 6-8%.
- Where in the capital of Estonia is better to buy real estate?
- Tallinn's Old Town, which is under protection of UNESCO, is small, but this very feature guarantees the growth of the invested capital. After all, even when property prices in Tallinn were falling, they remained the same in the Old City. Generally an apartment in Tallinn can be bought at a price of from €500 to €6,000 per sq.m. Comfortable and beautiful apartments which do not allow to get high rents, but guarantee the protection of your capital. I also recommend new housing in the city centre. Such apartments are highly liquid assets, and they will always be in demand.
- And what about property in other areas in Tallinn ?
- There is a demand for property in areas close to the centre, along the sea coast. Here is a special symbiosis of beautiful nature and urban infrastructure. Not only apartments but also houses are offered for sale, from € 250,000 to € 650,000. The feature of the market is that all objects are sold ready for living. However, when wealthy people buy expensive properties, they reconstruct them. This is what Russian buyers usually do.
Not by the capital alone...
- Is there an interest for purchasing houses and apartments in some other regions?
- In recent years, people are not only interested in real estate in Tallinn or in the north- east of the country, but also in scenic spots located by the sea, lake or river. Buyers are looking for a secluded place where they can escape from the city. Such objects are completely ready to move in, and usually there is a hired steward, who monitors the object in the absence of owners. The popularity of such properties caused by the fact that many Russians rent cottages in Finland for holidays and seek to buy similar houses. And Estonia offers similar properties in similar climatic conditions, but at lower prices.
There are also other areas that are popular, mostly Pärnu and the area of Lake Peipus. Mandatory criteria is the easy access to the region by car or train. By the way, St. Petersburg is connected with Estonia by buses, trains and ferries.
- And what about the prices?
- In the north-east of Estonia property prices are very low. Housing can cost from €3,000 for a studio apartment. Of course, when you buy such flats there are questions that have to be answered: why do you need it and who will live there? You must ensure that it's not located in the suburbs, away from the infrastructure.
Prices are so low primarily because of migration from mining towns to other regions and abroad. People who leave are desperately want to sell their houses in order not to pay for upkeep. Therefore it's necessary to verify the apartment concerning probable debts. Typically, such objects are being bought for obtaining multivisa.
In contrast, an expensive property can be found in Ust-Narva (Narva-Jõesuu). The cost starts from €1700-2000 per sq.m. Ust- Narva is often called the Estonian Jurmala. It's close to the border city of Narva, where apartments are much cheaper, less than €500 per sq.m.
- How difficult is it to buy a plot of land and build your own house?
- When buying a property there is no difference between the rights of residents and non-residents. At the same time , there are restrictions on the purchase of farmland and land in the border regions.
- It is known that there are entire cities where the Department of Defense has banned foreigners to buy houses
- Not in cities but in regions located on the border.
- Do not you think that this is a disadvantage of Estonia compared with Finland?
- Well, I would not say so. Non-resident may even purchase a forest, but having a permisson from officials. There is no problem but it takes time. I do not think it significantly affects the liquidity of our market. Moreover , you may set a legal entity and buy a land. Establishing a company in Estonia is quite an easy thing. It takes just 3-4 days, and most of the procedures can be made remotely via the Internet.
Difficult mortgage and "not Latvian" residence permit
- Almost all Estonian banks is known not to give mortgages to foreigners. What's going on now?
- Yes, it is. As for rates, non-resident can get a mortage of 6% - 60% of the property value. The main criterion for the bank is the quality of the real estate, its liquidity. Bank, with whom we cooperate, gives mortgage loans to foreigners, including the Russians, it's a rarity for Estonia. This is one of the advantages of working with us.
- Does it difficult to get a residence permit in Estonia?
- Buying a home is not related to getting a residence permit in Estonia, while it's a practice of Latvia. Residence permit in Estonia is given in connection with a business, school, family ties. Purchase a commercial property and engage in economic activity on the territory of Estonia give the right to apply for a residence permit.
Interview: Pavel Kuznetsov, ee24.com