Estonia Property: From Rags to Riches and Back Again - Twice
07 December 2011
One of the biggest surprises in the third quarter global house price data from the Global Property Guide is the fact that Estonia is now the 5th best performing market on the planet, with prices up 18.19% compared to Q3 2010. Estonia's property market has gone from rags to riches and back again twice now.
Estonia was one of ten countries to join the European Union in 2004. About the same time buying overseas property was going from being a rare thing that rich people did to something that anyone could afford to do with a little easy credit. The new EU members became hot favourites with these new "investors" and prices grew rapidly. Some reports put growth in Estonia property prices at 30% per year in 2005 and 2006, and performance was very strong in 2007 and even early 2008.
Like so many "hot" overseas property investment destinations, it all fell apart for Estonia in the second half of 2008. Estonia was hit harder than most by the crisis, but was one of the few countries that did not go crazy in trying to fight off inevitable recession with stimulatory measures. In fact Estonia was one of the first countries to employ austerity measures. Because of this Estonia has been one of the first to recover in the EU, and one of the strongest.
In fact, in 2010 Estonia had tightened its belt so much that it met the criteria to join the Eurozone, which state that a country must have inflation less than 1.5% higher than the three best performing members, government deficit less than 3% of GDP at the end of the preceding fiscal year, and government debt less than 60% of GDP. As the clock rang in 2011 Estonia switched over from the Kroon to the euro, becoming the 17th eurozone member.
We can debate the timing of its doing so till the cows come home, but one thing is clear, it has certainly had a positive effect on the country's property market.