30.12.13

Buying a Home in Estonia - Price to Rent Ratio

If you want to buy a home in Estonia, after reading the quick Estonian economy review and about Price to Income Ratio you can evaluate if the real state market is over or under valuated using the Price to Rent ratio.

Price to Rent Ratio

When evaluating if a home is affordable, one measurement frequently used is the Price to Rent ratio, defined by average house price divided by the average yearly rent price. Historically in America, this ratio fluctuates between 15 and 25, where a value below 15 means it's cheaper to buy than rent, and higher values can indicate an overpriced house (or a bubble). The European Union Housing Price Index shows an all time low in Housing Price to Rent ratio, and the Global Property Guide European Price to Rent ratio shows how each country compares.

Estonian Price to Rent ratio

Let's see how Estonian Real State market fare's using this simple index.

Tallinn Price to Rent ratio

Since Tallinn is a special case in Estonia, let's take a look at it separately.

Big Picture

Even though the values above don't seem so good, Estonia has almost the lowest of European Price to Rent ratio. However, this lists compare upscale  houses with "Average per square meter prices in US$/€ of 120-sq. m. apartments located in the center of the most important city of each country".

Using Numbeo World Price to Rate map we can see that Estonia has a high but not so high ratio, compared to other world capitals, but I'm not sure how this values are calculated, so take it with a grain of salt.

What do you think, would you still buy a home in Estonia? Share it in the comments.

20 comments:

Anonymous said...

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