Where is Estonia?
Estonia, with its unique location on the Baltic Sea between Scandinavia and Russia, has historically played an important role in trade in this part of northeast Europe. The northern-most of the three Baltic States, Estonia has fared well since the break up of the Soviet Union. Having become a member of the EU in 2004, Estonia has greatly increased its international profile and tourist industry, as wealthy Westerners have discovered the impressive and beautiful Baroque city of Tallinn, and attractive Baltic Coast resorts.
Why consider a property investment in Estonia?
Property Investments Market
- After becoming a full member of the EU in May 2004, Estonia’s government has maintained a highly favourable and open attitude to foreign investment. Foreign investors are able to buy and sell property freely. As a result of this openness, of all the countries which joined the EU in May 2004, Estonia as received the highest level, per capita, of inward capital investment, totaling over 2,000 million EUR. (Source: Bank of Estonia).
- Although a country with a population of just over 1.3 million people (Source: Statistics Estonia) and a small property market, the big influence in Estonia has been overseas buyers. Due to their close proximity, smart property investors from Sweden and Finland have been investing in Estonia for several years. However, property investors from all over Europe are now not far behind, as they have begun to realise the potential in Eastern Europe and to diversify their assets into this high-growth investment market.
- During the past five years Estonian wages have increased steadily. If this trend continues and property prices increase in line with wages, many predict that Estonian property prices have the potential of doubling within the next three to four years. There is certainly nothing to suggest that the trend won’t continue this year or even for the next few years.
Rental Market Opportunities
- The rapid growth in tourism during the past few years is clearly leading to an equally rapid growth in holiday rental accommodation, mainly in Tallinn and Parnu.
- Increasing tourism means more new businesses, more new jobs generated and more people available to buy and rent properties. Rental yields, particularly in the old town in Tallinn, are a healthy 8-10%. As the city becomes increasingly popular as a city-break destination, it should provide an increase in real estate demand and bring an upward trend to property prices, particularly in the historic city centre.
- The current shortage of hotel accommodations, particularly in the peek seasons, brings a great opportunity for holiday rentals to the small property investor.
Property taxes in Estonia are relatively low and are likely to remain that way. In Estonia the land tax is the only real property tax, as buildings are not taxed separately. Keep in mind that, as with many other countries, an individual who is resident in Estonia is liable for tax on their income outside Estonia as well their income in Estonia.
Where should I invest?
There are two main areas to invest in property:
- Tallinn – Located on the northern coast of Estonia on the Gulf of Finland, about 80 kms south of Helsinki, Tallinn is the capital city and main seaport of Estonia. With its medieval charm and ongoing and unmet demand for real estate, the influx of investment in the city looks to continue.
- Baltic Sea Coast – This very popular stretch of coastline is located in southwestern Estonia. With its stretch of white sand beach and picturesque old town centre, Parnu is the beach and health resort town that everyone heads for. Since 1996 Pärnu has been known as Estonia's Summer Capital and has been nominated as a candidate for the European Capital of Culture in 2011.
How is the Tourist Market?