Developer: Tax hikes could trigger real estate market

“Low visibility is what creates uncertainty among buyers, real estate developers and builders today,” Kivisaar commented on the tax policy of the new government.

According to him, it is clear that tax increases favor the continuation of real estate price growth, because the price of an apartment increases if a higher rate of VAT is added to it. It gradually pulls up older living spaces as well.

“On the other hand, since the wealthiest buyers in the real estate market are mostly entrepreneurs and since our income tax rates have already risen and will continue to rise, experts have predicted that in the second half of this year, more payments will be made in the form of dividends, as owner’s income – which means that these entrepreneurs , private individuals will have more free funds,” he argued.

“Knowing the investment preferences of Estonians, real estate is clearly TOP 1-2 there. on the spot. On the other hand, it could favor the movement of financial resources to the real estate market.” It is difficult to say how these factors will start to work within a year or two.

“It may happen that those people who buy a new apartment in the first half of next year will have to pay a higher VAT rate when the apartment is finished – at least partially. At the same time, I really hope that the government has learned from this mess last year and this time the terms of implementation will be much clearer. It would be logical that those projects that were already started before the new tax rate was introduced – the old 22 percent VAT will be applied to them.”

Could this be the engine that triggers more interest in buying real estate?

“Yes, of course,” replied Kivisaar. “If people know in advance that property prices are going up and have been dreaming and postponing the purchase of their new home anyway, this is definitely one of the triggers that can influence purchasing decisions.”

The program also discussed the expanding rental market, which is still increasingly looking for its own direction. What’s exciting, what’s provocative.

“Certainly, the tax office still has a lot of work to do in this area,” Metro Capital CEO Ain Kivisaar admitted about the so-called floating 138 million euro tax money on the rental market. “I’m pretty sure that they will deliver in this direction and an AI that can bring together apartments for rent and owners and paid rent in different registries and … it’s not too difficult a task,” the developer did not see a big problem here.

“But the general trend of the market is that the rental market is becoming more and more professional and concentrated in the hands of bigger and bigger players, who today still have portfolios in hundreds and hundreds of apartments here. This in turn puts pressure on those individual rental investors, who, I believe, will find it more difficult in the future.”

According to Kiviaare, the movement of the rental market in the hands of institutional rental investors has not been strong during the last year and a half.

What could help speed it up?

“This would certainly be accelerated by a decrease in real estate prices, which would give funds and big money makers some sense of comfort and confidence that the price level they are buying at is good and fair,” he said. “However, on the other hand, I do not dare to give hope that this could somehow happen, because input prices and taxes are rising, and unfortunately this does not favor a fall in real estate prices – more like the opposite.”

How long can it last?

“It can last. There are no obstacles that this will happen quietly for the next 20-30 years. There are no borders here,” said Kivisaar.

“To the extent that it is not seen that the detailed planning process in Tallinn could take place faster than 7-10 years, this will certainly keep land prices very high,” Kivisaar said. The prices of those plots where there is a valid detailed plan and building right.

If the promise and vision of Tallinn’s deputy mayor Madle Lippus comes true and Tallinn begins to meet the three-year deadline for the detailed planning process stipulated in the law, it could bring down plot prices and revive the market, Kivisaar found.

In addition, the program also discussed the growth of buying interest in residential new developments, the forced sale of housing. But also about the relations between developers and builders in the background of the last three quarters of the year.

The presenter is Siim Sultson.