© The Financial Times Ltd 2013 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 24, 2012 8:17 pm
Tallinn, capital of the Baltic nation of Estonia, is a growing tourist destination but is also attracting companies seeking a north European base – and providing much-needed impetus for its housing market after almost a decade of volatility.
Skype, the Microsoft-owned software, was invented in Tallinn and remains a big employer, while a Finnish company has bought a shopping centre in Estonia’s largest-ever real estate deal. Now, Hard Rock International is in talks to convert a redundant civic building into a hotel and entertainment centre.
Unemployment is relatively low by Baltic standards – matching the EU average of 11.5 per cent, according to government figures, whereas in nearby Latvia it is 16 per cent – and property transactions are rising. But anyone who imagines homebuyers settling for the brutalist architecture dating from Estonia’s period as a Soviet republic (1940-91) will have to think again.
Although vast Soviet-era slab-sided industrial buildings exist near the airport and ferry port, and shoddy high-rises sit in the suburb Lasnamäe, the majority of Tallinn apartments are attractive and low-rise. They range from those in three-storey houses in the Old Town, dating from the 13th century, to those in the 20th-century city centre, where art deco blocks rub shoulders with contemporary units.
Baltic Sotheby’s International Realty is selling a 1,400 square foot one-bedroom apartment, spread over two storeys of an 18th-century Old Town house. It was renovated in 2005, preserving some original marble floors and plaster walls but complementing them with oak, parquet and stained glass imported from Italy and Spain. It is on sale for €420,000.
The same agency has a 2,500 sq ft modern apartment with roof terrace in the city centre, built in 2007 but unsold since then. Originally priced at €1.8m, it is now down to €1.3m.
Those wanting houses and gardens look to suburbs such as Kadriorg, close to the centre and home to the presidential villa, as well as Nõmme to the west and Pirita to the east. The latter boasts a beach, plus a marina built for the 1980 Olympic Games, when Estonia was part of the USSR.
On one of Nõmme’s tree-lined boulevards sits a renovated 4,000 sq ft house, built in 1940. It has staff accommodation, three main bedrooms, original walnut staircases and a cellar with a media room, sauna and games area. It is on sale for €1m unfurnished or €1.25m with the existing furniture through estate agent 1Partner.
These homes may appear surprisingly good value so close to a capital with good infrastructure, including relatively empty roads, a modernised airport and free wi-fi in most public areas. The reality, however, is that prices have been volatile since Estonia joined the EU in 2004.
Global Property Guide, an online international property investment service, says prices rose an average of 37 per cent between 2004 and 2006 before dramatic falls – in total exceeding 50 per cent – from 2007 to 2009. Prices then started gently rising again and Knight Frank’s global price index says that values increased a further 13.9 per cent in the year to June 2012.
Local agents say recovery is not yet certain. “It’s not unusual for homes to sell for up to 20 per cent less than their asking price. There is still a little uncertainty over where prices will go – probably up, but not by very much at the moment,” says Mark Shein of Baltic Sotheby’s Tallinn office.
However, agents and developers alike point to strong fundamentals in the national economy – a low level of public debt, recent OECD membership and Estonia’s standing as the world’s 16th most economically-free nation, according to the Index of Economic Freedom. They say these factors help create confidence in the industry: Estonia’s Register of Construction Works, for example, shows a 21 per cent annual increase in permits granted for the building of new homes.
A Singapore company has purchased Tallinn’s old KGB headquarters and is converting it into top-end apartments. ProKapital, an Italian developer building apartments, hotels and offices in Estonia since 1996, has two residential schemes – one including a new marina – due for construction over a 15-year period from 2013.
There are signs of a growing leisure property market, including Tallinn’s first residential golf resort. The Estonian Golf and Country Club has 125 plots, each in a wooded or elevated area with views of the “Sea Course”. Prices are €100,000 for a 12,000 sq ft plot – buyers then commission their own house in accordance with a master design guide – or three-bedroom villas from €400,000 including plot. Plans include the addition of tennis, swimming, football, cricket and equestrian or polo facilities.
The club’s proposals are a microcosm of the country’s ambitions, and consultancy Collier International says overseas investment by electronics firms will generate more demand for office space and homes from 2013. That will be good news for Tallinn’s top-end housing market, dependent for success on increasing its international clientele despite the turbulence of the world’s economies.
Graham Norwood was a guest of the Estonian Golf and Country Club
● Low-priced homes with a wide range of sizes, ages and types
● Tallinn is small and walkable, with 420,000 residents
● Reliable land registry and purchasing processes
● Tourism increasing rapidly, especially in the Old Town
● Housing market possibly prone to volatility
● Tough winters, with temperatures dropping to -10C
What you can buy for . . .
£100,000 An un-modernised two-bedroom apartment on the fringe of the city centre
£1m A three-bedroom detached period house with large garden in desirable suburb
Copyright The Financial Times Limited 2013. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.