Swedbank: real estate market shows signs of life

Seven reasons (IMHO) why the Estonian Real Estate market appears to be picking up:

1) Pent up demand. Many potential home buyers have now been sitting, watching and thinking for almost three years. The previous boom lasted between 2004-2007.
2) Certainty about EEK-Euro change-over rate now exists.
3) New home starts may not catch up with demand until mid 2012. Many construction firms have liquidated with a resulting widespread loss in construction skills.
4) Swedish banks exceed capital requirement targets.. The G20 ageement ,agreed to in Basel over the weekend, requires banks to meet 7% capital requirements by 2019 which, together with high savings rates, means banks in Estonia (most of which are Swedish) should have access to a „cash cushion“. The Swedish government currently imposes automatic nationaisation if banks go below 8% minimum capital requirements.
5) House price sales in some regions of Estonia have returned close to peak levels. Recent spot samples on City 24 (real estate portal) reveal interesting reading.
6) The supply of homes for auction appears to be low. Analysis of City 24 appears to reveal that there are approximately 157 dwellings (excluding holiday homes in Parnu and elsewhwere) on the market. Estonia has a population of 1.4m.
7) Salary increases at end of 2011 will be 20%. This is a reasonable expectation as the Public Service will probably receive a 10 % increase and a further 10% increase as compensation for Public cuts in 09-10 and a wage freeze in 2011.

Therefore :

Supply of credit exceeding demand
+
Demand for homes exceeding supply
= (enter your own answer)

Alternatively come up with eight reasons why the Real Estate Market will not pick up.

For the life of me, I don't know why anyone would be rushing into buying Estonian real estate at the moment, given the glut of property on the market and the scarcity of buyers. The only reason I could think of is that prices have bottomed out and there is a chance that they will start rising because as Mr Tukk says, there are "more and more purchase decisions and bookings". Fair enough, even if we take him at his word, that there are more buyers entering the market again, pushing demand and prices up - he then goes on to say, "several developers have started construction of new projects."

So, on the one hand he is saying there is a growing demand (therefore prices go up), and simultaneously he is saying there is going to be a resurgence of supply (therefore prices go down). OK, we don't know exactly what sort of balance between the two will be achieved, but to a certain extent they are bound to cancel each other out, either completely stalling any price growth or at the least, slowing it down considerably. So I wonder if there is any real reason to rush in and "BUY BUY BUY" when you could sit back and keep an eye on the market for a while before making your decision.

Apparently( according to the grapevine)the banks in Estonia do not believe that they are "sitting on" an excessive amount of foreclosed homes.

If I had to hazard a guess the real reason behind this positive sounding interview is that demand for credit is not as high, among "safe" consumers, as capitilasation would allow. Deposit interest and dividends have to be attractive in Sweden.

However one thing is for certain, and that is, the real estate market in Estonia is attracting a lot of interest.

It is true that 06 and 07 homes are selling at lower prices but that gap could narrow now that new building starts are being postponed until after the weather warms up next spring.

There is a lot of "pent up" demand for homes emerging providing the prices and loan conditions are attractive.

However I hope we do not return to the "narnia" of 06-07. 2005 (IMHO) saw a large jump in prices because prices, which had slowed down between 02 and 04,had to "catch up" but after that prices became irrational.