Overview of the apartment market in Harju County (as at the end of December 2016)

 

Of the transactions of apartments in Harju County, majority is formed by transactions in Tallinn and its neighbouring areas. Outside of Tallinn, the majority of transactions is made in nearby municipalities - Rae, Saue, Viimsi, Harku and Saku municipality. Besides these municipalities, the majority of transactions is also made in satellite small towns close to Tallinn, which are the towns located in Harju county - Maardu, Kehra, Keila, Saue, Loksa and Paldiski town. Real estate prices are strongly influenced by the distance of Tallinn or its bigger satellite regions and the closeness of major roads leading outside the city.

 

Transaction activity and price increase stayed stable in Q4

In Q4 2016, 3,109 apartment transactions were done; this was by 8,0% more than in Q3. Within the quarter, the arithmetic average transaction price was 1,579 €/m² and median price 1,524 €/m², which increased from Q3 by 1,5% and 1,0%. Compared to the same time in 2015, in Q4 3,1% more transactions were conducted, while the arithmetic average square metre price increased by 9,4% and median price by 7,1%.

 

As a whole, changes in transaction activity and price level in Harju county are related to actions on Tallinn real estate market; changes in the centre move during some time to areas with smaller population density. Similarly to Tallinn, the county as a whole is marked by a slowing down of the quick growth in transaction activity and price levels.

 

In December 1,145 transactions were made on the apartment market in Harju county, which by 16% in November 6,2% more than in the same month in 2015. The arithmetic average price of apartment transactions was in December 1,633 €/m² and median price 1,593 €/m². Arithmetic average decreased from November 3,0% and median price 5,3%. Compared to December 2015, arithmetic average decreased by 10,8% and median price 6,8%.

 

Growth in transaction activity was especially high compared to November, which was due to the seasonal growth in annual transaction activity characteristic to the Christmas period. Transaction activity increased mainly only in Tallinn; in areas within the county, 7,4% more transactions were done than in November. On the background of the impulse purchases in Christmas, the price levels of apartment transactions in the county as a whole did not increase very much differently from Tallinn; based on the changing median price it is seen that apartment transactions are done on increasing price levels. The constant growth in transaction activity has stabilised; increase in price level deduces from the transactions on growing price levels with secondary market apartments and new developments outside the county centre.

 

Transaction activity in Harju county and Tallinn town and the price dynamics in 2006-2016

Source: Land Board, transaction database

 

Apartment market in Harju county by municipalities

Harju county apartment market is formed above all by more active areas in terms of real estate market, of which the most important part is formed by Tallinn and thereafter municipalities in Harju county. As follows, the real estate market of Harju county has been divided into separate parts to describe the apartment market - Harju county municipalities and Harju county towns.

 

The number and price dynamics of the apartment market in Harju county municipalities in Q4 2016

Municpality *	Median (€/m2)	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	572	44,9%	44,5%	45,5%	6,7%
Harku	1 409	10,5%	11,7%	42,9%	21,2%
Jõelähtme	1 211	-7,2%	11,8%	-20,0%	-11,1%
Keila	295	-41,7%	-46,1%	26,7%	18,8%
Kiili	1 142	- **	-16,3%	200,0%	-18,2%
Kose	458	87,2%	-7,9%	-6,7%	-30,0%
Kuusalu	458	-18,7%	20,1%	30,0%	30,0%
Nissi	208	-2,1%	36,4%	-28,6%	-50,0%
Raasiku	857	-25,5%	5,1%	30,8%	112,5%
Rae	1 506	3,8%	0,9%	4,8%	-15,4%
Saku	1 250	-18,5%	26,7%	-52,4%	25,0%
Saue	1 506	3,9%	6,8%	44,4%	116,7%
Vasalemma	166	118,1%	624,2%	0,0%	-57,1%
Viimsi	1 494	0,8%	3,8%	-4,2%	-30,6%

* Municipalities were less than 5 apartment transactions were done are not included in the table.

** In municipalities that have not been accounted in the table, too little transactions were conducted during this period in order to publish the data.

Source: Land Board, transaction database

 

In terms of municipalities in Harju county, most active apartment market areas are the municipalities close to Tallinn. These are Harku, Viimsi, Rae and Saue municipality that area characterised by the urban sprawl close to Tallinn and activity of construction activities. In these municipalities, there are most new developments in areas outside of Tallinn, per the residential fund of Harju county; the other Harju municipalities are characterised by the apartment buildings built mainly in 1940-1990.

 

As for the number of transactions and median price in municipalities, thorough conclusions cannot be made on the real estate market except for Harku, Rae, Viimsi and Saue municipality, as the regional transaction activity is too low to report trends under formation.

 

Harju county apartment market in terms of towns

In terms of the towns in Harju county, in addition to Tallinn, Maardu town is also most active. This deduces from the town size and the immediate closeness of Tallinn. In other towns in Harju county the general real estate market and apartment market is rather little active when compared to Tallinn. Small towns’ apartment market is mainly formed by the apartment buildings built in 1940-1990, single new developments can be seen in Keila, Maardu and Saue town, but rather little transactions are made with them.

The number and price dynamics of the apartment market in Harju county towns in Q34 2016

 

Town	Median (€/m2)	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
Kehra	576	8,4%	28,6%	71,4%	0,0%
Keila	1 037	-5,7%	5,8%	-2,5%	5,4%
Loksa	150	-32,6%	3,7%	0,0%	80,0%
Maardu	885	3,2%	13,4%	-1,7%	-17,4%
Paldiski	415	18,4%	16,9%	-3,7%	-33,3%
Saue	1 178	10,4%	-0,9%	0,0%	-22,2%
Tallinn	1 599	0,9%	6,4%	8,8%	5,4%

Source: Land Board, transaction database

 

In Q4 2016, the transaction activity and price level in the apartment market of Harju county small towns were without major changes compared to previous periods; growth of price level has been retained, but transaction activities have periodically decreased, this above all in Maardu and Paldiski. As for small towns in Harju county, more thorough conclusions can be made only in terms of Maardu due to short-term statistics, since regional transaction activity is too low to reflect shaping trends.

 

Offer and demand dynamics

In 2016, 11 316 apartment transactions were done in Harju county, which was 3,3% more than in  2015. The arithmetic average transaction price was 1,519 €/m² and median price 1,478 €/m², which had thus increased by 5,7% and 6,1%. Growth in price level and transaction activity had stopped compared to previous years; the growth has occurred mainly in Tallinn and its neighbouring areas. Without considering the statistics related to Tallinn, 1,7% less transactions have been done in Harju county in 2016 than in 2015; thus, in 2016, activity on the apartment market has been led only by Tallinn.

 

Real estate prices have significantly grown in the last years. Consumers purchasing residential surface have become more calculating due to the wide selection of offers, but extension of the sales period of apartments cannot be seen. Based on Arco Vara statistics, in 2016, the average sales period of apartments in Harju county was 213 days. Outside of Tallinn, prices of apartments in a good state have mainly grown, while consumer interest has increased for renovated apartment houses.

 

In more active small towns, the poor structure of offers has benefited a growth in offer prices and a decrease in transaction activity; significant new offers are added only in the extent of new developments. In case of apartments in a poor state and in need of repair, the interest is lower and the price increase has been also slower. According to Arco Vara’s estimates, there are sufficient offers on the county market as a whole in order to satisfy the current demand.

 

In case of housings in Tallinn and its neighbouring areas, demand remains high mainly in areas closer to the capital or in areas with good public transport connection. Apartments outside Tallinn are looked for mainly by younger people who need to work in Tallinn but who cannot buy a surface there. Differently from the high real estate prices in Tallinn and neighbouring areas, people who move to farer in the county can buy a bigger apartment for the same price.

 

In terms of farer areas in the county, the demand is influenced mainly by the sustainability and structure of the local centre. Areas where young people go to live have to have a shop, kindergarten and school. In case of Loksa, Kehra, Paldiski, Kose and Kuusalu, it can be marked that mainly older people stay in these areas. Younger people leave due to the distance of Tallinn and the costs related to constant back and forth travelling. In case of apartments in small towns, purchase power can be limited also by the higher central heating costs when compared to the level of Tallinn.

 

In terms of new developments, areas which are related to more than buying a place to live have been started to prefer. Projects that can offer besides general construction quality and price also a complete social-economic and natural living environment are preferred. New developments have been built mostly to Rae municipality but also to Viimsi, Harku, Saue, Saku and Jõelähtme municipality. The price offers for new developments in Harju county remain mainly between 1,300-1,900 euros. Interest for new developments in the county is rather high, but real estate developers do not see the sense in moving to smaller markets due to the low state of the price level.

 

The growth of price and transaction activity in the last years has been also followed by the constantly growing number of offers. According to the www.kv.ee portal, the growth in the number of apartment offers in Q4 2016 in Harju county had quickly stopped. In the start of 2017, there were as much active offers as in the same time in 2016. The number of sales offers has decreased due to seasonal changes compared to previous months by about 2% a month since September 2016. On the background of decreasing volume of offers, offer-based prices have increased monthly by about 1%, being thus strongly influenced by the offers in Tallinn. Despite the fact that the number of offers has continuingly grown in terms of years, major decline moments cannot be seen in price level changes, but the level of the number of prices is terminating the growth of price level.

 

Forecasts

Similarly to Tallinn, the prices of residential real estate have been constantly growing in Harju county after the financial crisis of 2008, since the second half of 2009. By now, the price levels in Tallinn and neighbouring areas have reached the top level of a year ago. Due to the big number of offers and the related competition,  the growth of price levels has slowed down in many areas close to Tallinn and do not have significant space of growth in current market conditions.

 

Transaction growth has been accompanied in the last two quarters by a decrease in the volume of offers; thus, there can be some pressure for the further growth of price levels. In a situation where construction prices are stable but plot prices are too expensive for developers no significant growth can be seen in the extent of private orders in the construction sector in the near future and thus an additional offer for apartments added. In Harju county, apartment prices have grown less than in Tallinn, but enlivening of the real estate market has been similar in the entire county.

 

In Tallinn, the main problem in the near future will be above all the high share of new developments and the number of such offers in 2016 has benefited the growth in transaction activity and average price level. The transaction activity and price level on the older residential fund on the secondary market has been stable for a longer time already. In terms of the stabilisation of new developments in apartment transactions, a statistic slowing down is expected in the growth of price levels and transaction activity.

 

In Harju county as a sparsely area, the share of new developments from the entire apartment market is marginal; thus, the price level in Harju county’s small towns and municipalities is stable and does not react immediately to the possible changes in the transaction and price dynamics on Tallinn apartment market. Until the incomes of Harju county residents and the general level of welfare grow, unemployment is low and commercial banks still issue loans in the environment of low interest rates, no significant changes are expected on the apartment market of Harju county in the near future. In a long-term perspective, the migration to Harju county and Tallinn is expected to decrease, inflation to increase and the current wage growth to decrease, based on which the current transaction activity is expected to decline somewhat.