Estonian Housing Market Shows Strong Signs of Recovery with loan Growth & Falling Payments
Estonia‘s housing loan market is experiencing a resurgence, fueled by declining interest rates and growing borrower confidence. Data indicates a significant increase in loan activity, with average monthly mortgage payments decreasing by approximately €80.
According to Bank of Estonia economist Taavi raudsaar, the housing loan market has been steadily recovering over the past year and a half. Through the first ten months of this year, loan volume has increased by roughly 15% compared to the same period last year, with the average loan amount rising by 9% to €140,000 (up from €130,000 a year ago). The typical mortgage term remains around 26 years.
While the number of loan applications has decreased by 13.5% year-over-year, Swedbank mortgage area manager Anne Pärgma reports a 30% increase in finalized loan agreements.This suggests a shift towards more decisive borrowers who have already identified properties. Pärgma attributes this to increased confidence in transactions. Potential borrowers may also be acting in anticipation of planned income tax changes expected to increase disposable income.
A key driver of this market activity is the recent drop in the Euribor rate – approximately one percentage point year-over-year – directly translating into lower monthly mortgage costs for borrowers.
The recovery is also evident in new developments. Endover, a real estate group, is experiencing strong sales at its Volta Quarter project in Põhja-Tallinn, a rapidly growing area where new property prices are now exceeding those in the city center. CEO Roul Tutt believes the Estonian real estate market has “reached the bottom” and is poised for “stable growth,” citing market maturity, stability, and lower interest rates as supporting factors. He notes the market is now capable of absorbing new housing supply.