The Estonian property market

Smaller deals keep the real estate investment market active

While Estonia saw the fastest growth among the Baltic countries in 2021, 2022 brought rising prices instead. Inflation in Estonia reached record levels, not even seen during the financial crisis, and began increasing towards the end of 2021 due to rising energy prices. The situation worsened in H1 2022 when Russia launched a full-scale war in Ukraine, causing further energy supply issues and driving up the cost of other goods. Inflation reached 19.4% in 2022, with the highest price increases for food and non-alcoholic beverages (20%) and housing (nearly 51%). The economy is estimated to have shrunk by -0.5% in 2022 and is expected to grow by just 0.4% in 2023, mainly due to increased government spending, while other components like consumption and investments stay stagnant. Inflation is expected to decelerate to around 10% in 2023.

Estonia's real estate investment market saw a decline in volumes in 2022 compared to the previous year. Total investment dropped nearly 50% from its 2021 high, a trend seen in all Baltic countries. 23 deals over 5 million EUR were made in 2022, with 17 transactions in H1 and 6 in H2. Investments in H1 amounted to 129 million EUR, while H2 saw 96 million EUR. The most active sector was industrial, accounting for almost half of transactions and volume. H2 2022 also saw a sharp increase in interest rates, reducing investment activity.