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Estonia leading European property boom

10 March 2006
House prices are rising faster in Estonia than anywhere else in Europe, with overseas investors helping to boost the country's property market by 28 per cent in 2005, according to the Royal Institute of Chartered Surveyors (RICS) annual survey.

The capital Talinn is taking off as a tourist destination, offering Scandinavian-style romantic getaways and stag weekends at a significantly lower cost.

Investors have similarly taken to Talinn's apartments, encouraged by relatively low interest rates and sure of a rental return from the tourists looking for somewhere attractive to stay.

General European trends noted included prices rising faster in smaller countries and northern Europe catching up with traditional investment in the south.

Talinn's popularity helped Estonia top the property table for the second year running, and while Spain remained strong, Denmark shot to second place.

Here the key factors were the introduction of interest-only mortgages and a recent shift from fixed-rate to variable deals.

Prices in the UK rose by just two per cent last year, while Germany was the only country where they actually fell.

Reading University's real estate professor, Michael Ball, sounded a note of caution, however.

Risk in the European property market was growing alongside rising interest rates, he said.

Nevertheless, Milan Khatri, RICS chief economist, said that "historically low mortgage interest rates" meant "any talk of a real European housing market slowdown is premature".

To read more about overseas property, click here.

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