The initial shock following the rise in interest rates hit the Estonian real estate market at the end of 2022. Since then, we have seen all market participants adapt, resulting in a 20-30% drop from the peak activity levels. While it appeared in the spring that the market would continue on a stable wave until a new rise, we are now witnessing the final tremors of a bear market. All key indicators (number of transactions and median price) have returned to market lows. The over 25% increase in the number of listings indicates that people are often forced to sell their assets. Those selling their only home are also moving to the rental market, as shown by the decrease in rental market offerings and rising prices. Since the rental market is more efficient than the sales market, this indicates the near-term direction of the sales market. In the medium term, economic growth and increased purchasing power will provide a new growth seed for the real estate market. Prices are already rising in developed markets, but the previous rapid growth and length of the economic downturn in our market extend the recovery time.

Across Estonia, fewer than 1,450 apartment ownership transactions were concluded in June, which over the past two years was only higher than the results of January and February 2023 and January 2024. Compared to a year ago, nearly 28% fewer transactions were made. For the fifth consecutive month, the median transaction price also fell in annual comparison, dropping 6% to around €2,114/m². In the first half of the year, about 9,200 transactions were made, which was 12% less than the same period last year. The median transaction price (€2,021/m²) was 5% lower compared to the same period.

In Tallinn, preliminary data show only 573 transactions were concluded in June, marking the third time this year that the number of transactions fell below 600. In the first six months of the year, 3,631 transactions were concluded in Tallinn based on preliminary data, 17% less than the same period last year. If we consider the actual market activity, combining secondary market transactions with new development sales from public listings rather than previously concluded deals, we also see a decline in activity. About 25 fewer new development transactions were concluded in June than expected, and the secondary market fell sharply (about 20% compared to the average result of the previous 12 months). The median transaction price fell 1% compared to the first half of last year (€2,836→€2,796/m²). However, the condition of apartments reaching transactions has improved, so an apartment in average condition still needs to trade at a discount of up to 10% off the asking price to reach a transaction. The number of listings on the supply market has grown significantly (+28% compared to a year ago), and the asking price has fallen 2.5% from the peak.

Of the major cities, Tartu has fared the best compared to the first half of last year – the number of transactions fell by 14% (886→764), and the median price fell by 3% (€2,476→€2,402/m²). The decline is mainly due to a decrease in the proportion of new developments, while the growth in the number of listings is moderate compared to other regions (+13% compared to June last year). In June, 105 transactions were concluded, surpassing only the January result of this year. The median transaction price in June was €2,449/m², which remained at the level of June last year.

The real estate market in Pärnu has fallen the most among major cities. Pärnu is known as one of the most speculative markets in Estonia, so the decline there is usually one of the longest. Compared to last year, 33% fewer transactions were made in the first half of the year, and the median price fell by 8%. The price level has remained stable, but due to the sharp decline in the number of new development transactions, it has statistically fallen. In the first half of last year, more than 100 new development transactions were concluded, but this half-year, more than half as many. The number of secondary market transactions has also fallen by more than 20%. In June, 58 transactions were concluded, which was the second-best result of this year. The median transaction price was €2,041/m². The first half of this year saw 293 transactions and a median price of €1,950/m².

In Narva, the number of listings has increased, but sales numbers in June were the lowest of the year. Fifty-three transactions were concluded, 21 fewer than a year ago. Preliminary data show that 394 apartment ownerships were sold in the first half of the year, 2% less than last year. Asking prices are stable, but transaction prices have slightly decreased. The median transaction price in June was the lowest of the year (€451/m²). The median price for the first half of this year was €506/m², 4% lower than the same period last year.