The ongoing demand for property in Tallinn has been driven by its recent European Union membership, an excellent business environment, liberal economic policy and low taxes which have already attracted numerous investors including companies and individuals. Foreigners in Estonia can freely buy and sell residential real estate with no restrictions, and completion can take less than a month. The growth of GDP is around 6% and rental yields are a healthy 10%.
The profitability of Estonia from a property investor's perspective was obvious even before the country joined the EU back in 2004. Because Estonia was attracting significant foreign investment as a direct result of its close business ties with Finland, Germany and Sweden, so domestic purchasing power was increasing and demand for accommodation to rent and buy was increasing.
The property buying process in Estonia is well established, straightforward and inexpensive. Mortgages are now available for foreign buyers and those who wish to own more than one property and who purchase through an Estonian limited liability company can save significant tax on profits and gains.
Why Choose Estonia?
- High economic growth
- Liberalised, stable, low tax economy
- EU membership since May 2004
- Stable currency pegged to the Euro
- High levels of foreign investment
- Members of WTO & NATO; US ‘Most Favoured Nation' Status
- Significant investment from Finland & Sweden
- Highly skilled, low wage workforce
Why Property in Estonia?
- No restrictions on foreign ownership of property
- Consistent upward trend in property prices (av. 12% pa)
- Rapidly growing tourism in Tallinn (the "New Prague" & UNESCO World Heritage Site) boosted by the commencement of low cost Easyjet flight services from London and Berlin in November 2004
- Increasing property investment from Finland (Helsinki is close & 300% more expensive)
- Increasing domestic demand prompted by lower local interest rates & banking sector reform
- EU membership & investment likely to stimulate prices further
- Rental yields around 8-10%
The property in Tallinn, Estonia's capital city, is relatively expensive and in line with western prices; the most expensive area is the city's old town known locally as Vanalinn, and the further out from Vanalinn that you explore the more you can buy for your money. But property investors should not be put off by the fact that prices in Tallinn are already strong. Property prices are continuing to rise and rental rates remain steady and attractive.
The general tendency is that the prices are highest in Tallinn, Pärnu and Tartu and in towns nearby (in case of Tallinn - Saue, Keila, Maardu, in case of Pärnu - Sindi and in case of Tartu - Elva). The average price per square meter has increased most of all in Kuressaare, from 290 to 475 EUR/m2, i.e. 39%. Cheapest apartments can be acquired in the towns of Antsla (13 EUR/m2), Püssi (14 EUR/m2) and Kiviõli (16 EUR/m2). But in general, the prices of apartments have risen not only in Tallinn but also elsewhere in Estonia.
The property tax in Estonia consists only of a tax on land. The rate is 0.5 to 2.0 percent of the assessed value of the land, as determined by the local municipality. Acquisitions of property are subject to a 0.15 to 1.0 percent transaction tax, which is levied based upon the contractual transaction value or the estimated market value of the property, whichever is greater.