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.

Comparing house prices - Estonia and Europe

After reading the previous post about Housing prices in Estonia, you might be thinking that maybe Estonian prices are not that bad compared to other European countries. Let's try to do a rough comparison of Housing prices in Europe and see how does Estonia ranks.

It's good to note that we may be comparing oranges and apples (and there are lies, Lies and Statistics), so take this results with a grain of skepticism.

Global Property Guide has several very good articles on Estonian Housing market, and compared to Europe, Estonian Square Meter Prices are quite low (last 6th position). Also comparing House Price to Income Ratio to Europe, Estonia is on the middle (below top 15). However, this lists compare upscale  houses with "Average per square metre prices in US$/€ of 120-sq. m. apartments located in the centre of the most important city of each country".

Numbeo has some nice interactive maps of World Price to Income Ratio but I don't yet know how this numbers are calculated.

We can get more detailed analysis on a country per country basis, to get more insight. For instance, here's a recent article on Swiss home prices to income ratio.

What do you think: Does the world market affects Estonian housing prices? Postimees reports that foreigners almost one quarter of Estonian real estate transactions in 2012, although we have to remember that a big percentage of local residents holds a foreign or grey passport. Share it in the comments!

Living in Estonia - Renting a Flat

You have decided to come for a bigger stay in Estonia, and don't want to stay in Hotels or Hostels. You want to rent your own flat. So, what do you do?

First, check online the available flats for rent in the biggest real state portals:

and

These portals collect entries from mostly all Real State companies websites, and has nice search interfaces in English, so you can browse the Estonian Real State market.

When you see the price of the rent, remember that at the first month you will have (usually) to pay 3 times its price for the Real State Agency: the Rent in Advance; the Deposit; and the Real State fee; So if you want to rent a flat for 5.000 eek, you will have to pay 15.000 when signing the contract.

Check with attention the Heating System of the flat. There are many options in Estonia, going from Oven heated houses (where you have to buy wood to heat it in winter), Electric Heaters (the most expensive system), Gas Heating, Central Heating... Ask always for the prices of the utilities (water, electricity, heating) in summer and winter!

Be aware that this is a very volatile market, so if you saw a interesting place, you have to call the agency, book it for visitation, and in 24h decide if you are taking it. It might happen (often) that you will be racing against other consumers, and the first one to sign and pay everything gets the deal.

Usually you will find information in English, but here is a little glossary to help, just in case:

Kinnisvara - Real State
Üür - Rent
Müük - Sale
Korter - Flat
Maja - House
Korrus - Floor
Tuba - Room (including living room and bedroom)
Magamistuba - Bedroom
Vannituba - Bathroom
Hind - Rent Price
Tagatisraha - Deposit Money (usually the same as the rent)
kommunaalkulud - Utilities (water, electricity, heating)

Well, if you speak Estonian, you might try to find a flat in the newspapers and rent straight from the owner (avoiding paying the Real State company fees), but its not common to find owners that rent to foreigners. Also another option for the young foreigners is to share a flat. Do you have any good hint for living in Estonia? Post it in the comments!