In Harjumaa, most transactions with improved residential land are made outside the capital in areas close to Tallinn, where there are the most dwelling regions. Viimsi and Harku municipality stand out in terms of transaction activity. Purchasers’ preferences are the highest for up to 20 km outside of Tallinn that can be also considered the zone of going to work to Tallinn. Outside the municipalities close to Tallinn and the close areas to the county’s bigger centres, interest has remained modest. Differently from transactions done in Tallinn, the transactions in the neighbouring areas concern mostly new developments.

 

Price and transaction activity growth in Q3 was mainly led by new developments

Due to the seasonal nature of the real estate market, it became more active in Estonian larger areas in Q3 in August and September. Compared to apartment market, residential market is rather little active and usually there is not an increase in price level or transaction activity. On residential market, the sellers’ price wishes and purchasers’ preferences have remained rather similar to the previous quarters. Above all, the price wishes of new development offerers have increased like the demand for new developments. According to Arco Vara, there are sufficient offers on the market to meet the demand.

 

In Q3 2016, 3,9% more transactions were done with improved residential land in Harjumaa as a whole than in the previous quarter this year. The arithmetic average of transaction prices was 131,000 euros and median price 85,000 euros. Arithmetic average increased by 2,1% and median price by 6,3%. Compared to the same time last year, transaction activity increased by 14%, arithmetic average transaction price by 11% and median price by 2,4%. Residential market indicators have remained largely unchanged; growth of transaction activity and price level has occurred mainly in the capital and areas close to it with reference to new developments.

 

In October, a total of 121 improved residential land transactions were done in Harjumaa as a whole; this was by 18% less than in September and October last year. The arithmetic average transaction price was 135,000 euros and median price 104,000 euros. Compared to September arithmetic average increased by 4,9% and compared to the same month last year by 11%. Median price increased compared to September by 36% and compared to the same month last year by 34%. The number of transactions decreased compared to previous periods, but price level has increased significantly on the account of more expensive secondary market and new developments.

 

Transaction and price dynamics of improved residential land in Harjumaa and Tallinn

* As at 31 October 2016

Source: Land Board, transaction database

 

Harjumaa residential building market by municipalities

Harjumaa’s residential building market is formed mostly by more active areas in real estate market, of which the most important part form towns led by Tallinn and then municipalities close to the capital. Differently from the apartment market of Harjumaa, the residential market is somewhat more active when moving away from the capital; in areas where apartment s are not sought, it is easier to find a buyer to residential buildings. Among municipalities, the most preferred are these close to the roads leading out of Tallinn or close to the municipality centres.

 

Regional transactions’ number and price dyanmics in Harjumaa municipalities in Q3 2016

Municipality *	Median transaction price	Change of median compared to last quarter	Change of median compared to the same time last year	Change in transaction number compared to previous quarter	Change in transaction number compared to the same time last year
Anija	20 000	-47,0%	-28,6%	0,0%	71,4%
Harku	70 000	29,6%	-15,2%	1,8%	50,0%
Jõelähtme	57 500	-23,3%	-26,3%	38,5%	38,5%
Keila	43 450	24,1%	12,9%	-9,7%	64,7%
Kernu	19 950	-20,2%	33,0%	-43,6%	-18,5%
Kiili	54 500	-17,4%	11,2%	31,3%	40,0%
Kose	32 130	- **	-41,6%	- **	12,5%
Kuusalu	39 500	-54,6%	-21,0%	0,0%	100,0%
Raasiku	120 000	-7,7%	41,2%	88,9%	142,9%
Rae	177 000	-22,2%	-9,2%	33,3%	4,3%
Saku	75 000	25,0%	13,6%	-12,1%	-6,5%
Saue	105 000	-32,2%	8,8%	-40,0%	-40,0%
Viimsi	120 000	-29,4%	76,2%	46,4%	0,0%

* municipalities where no transactions with improved residential land were conducted are not included in the table

** too few transactions were done in the area and thus have not been included here

Source: Land Board, transaction database

 

In term of Harjumaa municipalities, the most active areas are the municipalities close to Tallinn. These are Harku, Viimsi, Rae and Saue municipality that are all characterised by urbanisation due to the closeness of Tallinn and high activity of construction activity. The buildings concerned in these areas are usually new developments. When distancing somewhat from Tallinn, the most active areas are Saku, Kernu, Keila, Kiili and Jõelähtme municipality.

 

As for the number of transactions and median price in municipalities, more thorough conclusions cannot be made differently from the above mentioned areas, since regional transaction activity s too low to report forming trends.

 

Harjumaa’s residential market regarding towns

As for towns in Harjumaa, besides Tallinn, Maardu town is also active in terms of residential and apartment market; this is due to the town size and the immediate closeness of Tallinn. In other towns in Harjumaa, the general real estate market and residential market are rather little active compared to Tallinn town and its neighbouring areas. The residential market of small towns in Harjumaa is formed by residential buildings built in 1940-1990, new developments are mainly from 2011-2016.

 

Regional transaction number and price dynamics in Harjumaa towns in Q3 2016

Town *	Median transaction price	Change of median compared to last quarter (%)	Change of median compared to the same time last year (%)	Change in transaction number compared to previous quarter (%)	Change in transaction number compared to the same time last year (%)
Keila town	129 229	8,6%	- **	140,0%	- **
Maardu town	58 750	-22,7%	48,7%	-20,0%	-39,4%
Saue town	147 000	- **	25,6%	25,0%	0,0%
Tallinn	181 000	-4,7%	1,5%	12,4%	17,6%

* towns where no transactions with improved residential land were conducted are not included in the

** too few transactions were done in the area and thus have not been included here

Source: Land Board, transaction database

In Q3 2016, transaction activity and price levels in the small towns in Harjumaa remained without major changes compared to earlier periods. As for small towns in Harjumaa thorough conclusions cannot be made due to short-term statistics, since the regional transaction activity is too low to report shaping trends.

 

Regional specificieties of the residential market and consumer preferences

As for Harjumaa the most preferred areas outside Tallinn are above all naturally beautiful and private locations. The most preferred areas are in Harku and Viimsi municipality, thus the closeness of the sea and Tallinn are preferred. The price levels of areas close to Tallinn and also naturally beautiful are rather similar to the residential building prices close to its neighbouring areas.

 

The high season for purchasing unimproved residential land and buildings in need of renovation is above all in spring and summer. In spring, more ready buildings or buildings in need of renovation are searched in order to move in immediately or finalise the construction works during summer. As for purchases of unimproved residential land, autumn is more likely time, as starting construction works takes usually more time due to documentation after which the works can be begun in spring.

 

For purchasers of residential or unimproved residential land, the region’s structure and state of roads and street network is most important. In areas with no complete infrastructure the plots are still of low liquidity following the once-time boom period. Interest for half-finished buildings has also decreased due to the high share of buildings that are ready or suitable for moving in. people are ready to pay higher price only for higher construction quality, internal finishing in a good state or a spacious plan.

 

Both in Tallinn and its neighbouring municipalities, residential buildings in a stone construction and with modern heating solutions are searched (electricity and liquid heating are the least valued), the closed net area of which is between 150-200 m². In a state where incomes have steadily grown and general level of welfare is high residential buildings in a good state and ready for moving in are sought. New developments with a spacious plan, functionality and low utilities are preferred.

 

The prices of residential buildings that need renovation start in Harjumaa usually from 50,000 euros. The sales offers and transactions of residential buildings in a good state are usually between 80,000 – 130,000 euros. The price level of residential buildings in a very good state is between, 130,000 – 200,000 euros. The price level of summer houses close to Tallinn is usually between 25,000 – 50,000 euros depending on the state and location of the building. Summer house prices are mainly influenced by waterbodies close by and the state of livability.

 

Arco Vara estimates that the typical house purchaser in Tallinn or its neighbouring areas is a young family with one to three children. In terms of suitable offers, the choice depends on the household income and thus loan capacity. The price levels of residential buildings are usually higher in Tallinn and its neighbouring areas by the sea; when moving away from the capital toward the inland, the prices are getting cheaper due to the distance.

 

Offer-demand dynamics

The price level of the residential building market in Harjumaa has been stably growing in the last years. Differently from the apartment market, the number of offers on the residential building market has remained rather unchanged since 2014. In 2016, the number of offers of residential buildings in  Harjumaa has decreased somewhat from August to October. Based on short-term statistics, offer-based price levels have increased; real transaction prices have grown constantly compared to previous periods only in the neighbouring areas of Tallinn. Residential market is characterised by the seasonal decline in the number of offers in autumn and spring.

 

Consumers prefer new developments and when buying a property, selection is first made among properties with higher price; the purchasers’ confidence and requirements on housing remain high. As for Harjumaa, most new developments are built to areas in the immediate vicinity of Tallinn. These areas are the small towns and villages located mainly in Viimsi, Harku, Saue, Saku and Rae municipality and characterised by constant population growth. New development areas constantly arise for new developments when distancing from Tallinn, because suitable plots close to the city in more preferred areas are decreasing.

 

Offer and construction dynamics of the residential building market of Harjumaa (single-, semi-detached dwellings, terraced house boxes)

 Source: Land Board, transaction database

* The data from 2016 are as at Q3

 

Construction of an individual dwelling takes usually a year. The big difference in the number of construction and usage permits can depend on the fact that the absence of a usage permit does not hinder the putting into use of a dwelling but its sales (if the purchaser wants to finance it with bank loan). As single-family dwellings are usually built for oneself, not for sale, many dwellings receive usage permit with a temporal shift.

 

Forecasts

Compared to apartment market, residential building market is rather little active; thus, conclusions cannot be made for a longer perspective based on short-term statistics. Some statistic price changes depend on the transactions done with single very high or low prices. The residential market has also price levels for which sellers are ready to negotiate the price; thus, when reaching the actual transaction, offer and transaction prices usually differ by up to 10%.

 

After the construction legislation that entered into force on 1 July 2015 residential building market has become more complicated as for Estonian real estate market. When purchasing with a bank loan, the credit institutions require that the documentation related to the dwelling is correct (incl. construction and usage permits, construction project and in case of smaller changes also construction notice/usage notice). Above all illegal buildings need legalisation; this happens mainly with older immovables where several outbuildings have been also built to the yard besides the dwelling.

 

In addition to available documentation and its importance access to the properties from public roads is also important. Property appraisers encounter many properties for which access from a public road has not been ensured. Until there is no access through a legal servitute, banks do not usually agree to finance the purchase.

 

Leaving aside the restrictions of commercial banks for enlivening of the residential market, no major changes are expected on the residential building market of Tallinn and its neighbouring areas in the near future. Dwellings are searched and purchased mainly by households that earn more than the average and whose social and economic welfare remains positive according to forecasts in the near future. In a situation where construction prices and the number of dwelling sales offers remain high one cannot expect shortening of sales periods or price levels. Due to the high price level the consumers can choose between apartment and residential building market – for a bigger apartment bought to Tallinn city you can purchase for the same amount a residential dwelling close to the city. According to estimates from Arco Vara, the prices of residential buildings in more demanded areas and plans can rise somewhat, but shortening of the sales period of more expensive residential buildings cannot be expected.