Situated in northern Europe, much of Estonia is actually surrounded by the Baltic Sea and land locked between Latvia and Russia.  Since the demise of communism and the lifting of the so called “Iron Curtain” many countries such as Estonia have taken a greater interest in the European Union and the potential for economic stability at last.  After a period of waiting, Estonia was finally admitted to the Union in May 2004 and the economy has mostly definitely benefited from increased trade and investment.

Introduction To Estonia

Estonia is probably one of the flattest countries within Europe with the highest “mountain” only reaching 318 metres above sea level.  As a result the country is dominated by a large number of rivers and lakes, which offer some of the most beautiful scenery in the country.  Covering only 45,000 km2 and with a population of only 1.3 million people, the country is still very vibrant.

Surprisingly the country has not only been heavily influenced by neighbouring Russia, but there are also strong links with the likes of Sweden and Finland who have both featured heavily in the country’s history.  The country itself is broken down into 15 counties which are all controlled by the central government in Tallinn.

While many people may not actually have been aware of the size and location of Estonia, it is a country which has a strong economy, good prospects and above all great trade relationships with the likes of Europe and Russia - the best of both “worlds”.

Property Market in Estonia

The property market in Estonia has been very buoyant since 2000 with many properties doubling over the last 6 years.  There was a further increase in interest and demand when the country joined the EU, and this together with plans to implement the Euro in 2008 have created an environment which will continue to attract foreign investment.  There is also the fact the Estonian authorities have implemented a tax regime which is very beneficial to both national and overseas investors.

Apart from the fact that foreign investment is encouraged, the increased exposure to Europeans has resulted in an explosion in the tourism market, which has jumped by 40% of late.  When you add in the fact that the economic boom has afforded some substantial wage rises of up to 11% over the last 12 months, this has a natural knock on effect to the housing market.  Many are comparing the Estonia economy to that of Hong Kong with a number of skyscraper developments under way in the capital Tallinn and interest beginning to spread outwards.

As you would expect from a country which is so small in size and population, much of the business community is based within the capital Tallinn, effectively creating a sub property market for the capital alone.  Prices in Tallinn have been very very strong of late and with demand currently far exceeding supply there is every likelihood this should continue for the foreseeable future. 

On a cautionary note the rise in wages was probably a little over due after the depressed economic activity pre 2000, but there is a real need to reign this in at some stage to ensure that inflation does not get out of control.
 

Buying Property in Estonia

Estonia has its very own network of quality estate agents, and while many people may initially search for available properties on the internet, it is essential that you involve some one from the industry at a very early stage.  Sale lead times can be very short for quality properties with the market changing on an ongoing basis - speed can very often be of the essence, especially in Tallinn.

The buying process has been broken down into a number of stages which include :-

Identifying the property you are interested in (at this point you should involve a local estate agent and translation expert).
The signing of a preliminary contract expressing your interest in the property, and the requirement to lay down a 5% deposit.  After the deposit has been paid the property will then be taken off the market.
It is at this stage (normally 6 to 8 weeks after the preliminary contract) that you will be formerly required to visit the country to sign a notary, and transfer an additional 15% - 20% of the purchase price.    
Confirmation of funding arrangements for the balance (local mortgage arrangements can actually be arranged up to 12 months prior to completion).  The trend in the country is interest only mortgages, with the Estonia base rate very low (and expected to continue so for some time).
Completion.  You will be required to attend a final meeting with your banker, estate agent, lawyer, etc and the finished paperwork will be checked, translated and the final payment made to the seller.

The process is surprisingly straight forward.

Future Property Market

As touched on above the Estonia property market has performed very well since 2000, with substantial gains for a lot of investors.  The direct comparison to the expensive Hong Kong market is probably a fair reflecting of the size, nature and quality of the Estonia property market .

As with any property market, if the economy is performing well, wages are increasing, and foreign visitors and investment are on the up, it is difficult to argue that the price of property will not rise.  On the downside there is always a danger investing large amounts of money in what is really a very small market, and may well experience large swings if Europe as a whole were to experience an economic downturn (however unlikely this seems in the short term).

Another major reason why foreign investment has been so significant in Estonia is the helpful attitude of the authorities who seemed to recognise the importance of attracting foreign investment at an early stage. This business market has also registered with many overseas companies as the country is well placed for trade routes in and out of Europe and Russia, not to mention the vital access to the Baltic Sea trade lines.

Estonia may be small, but it has become a major trading position for many companies and with a booming economy, low interest rates this should continue for some time yet!