The first half of the year has seen a moderate but noticeable recovery in the real estate market. While the economic environment remains influenced by tax hikes and borrowing costs, several trends suggest that buyer confidence is gradually increasing and housing affordability is improving. This provides grounds for cautious optimism.
An overview by Domus Kinnisvara shows that signs of stability are becoming evident in Harju County’s residential real estate market, particularly in the secondary market. According to Martin Metsma, the Real Estate Appraiser at Domus Kinnisvara, the market is clearly being supported by both a decline in Euribor rates and wage growth, which boost buyers’ willingness to make well-considered decisions. ‘Stable prices have certainly played a role in restoring trust,’ he adds.
Home loan refinancing boosted the market
One of the most significant shifts that began last year and carried into this year has been the wave of home loan refinancing. This led to increased competition among banks and delivered tangible benefits to clients.
‘For example, in 2024, nearly 160 million euros worth of home loans were transferred from other banks to LHV,’ Catlin Vatsel, the Head of Private Financing Department at LHV, says. ‘At the same time, despite the general market slowdown, we managed to grow our volume of new home loans by as much as 65% compared to the previous year. It is showing that people do not base their decisions solely on interest rates, but also value transparency and flexible terms.’
According to Catlin, when taking out a home loan, it is worth seeking offers from multiple banks and paying attention to additional costs. ‘At LHV, for instance, there is no contract fee for home loans, property valuation is free and, for refinancing, we cover the notary fee. On top of that, early repayment is free of charge and can be done without prior notice,’ she explains.
Buyers’ market encourages thoughtful decisions
The apartment market in Tallinn is particularly active in the secondary segment: districts like Lasnamäe, Mustamäe, Põhja-Tallinn, and Kristiine have seen a gradual increase in transaction volumes. According to Metsma, sellers in these areas often offer discounts, giving buyers the opportunity to compare options calmly and make informed choices.
New developments are also regaining momentum: with construction costs stabilising and continued demand for energy class A homes, developers are feeling more confident to move forward. ‘The good news is that, since the second half of last year, real estate has become more affordable for buyers,’ Metsma confirms. ‘Prices have levelled out and falling interest rates are boosting confidence.’
Outside of Tallinn, the most popular areas are Viimsi, Rae, Harku, and Saue municipalities, offering more attractive pricing while still being conveniently close to the capital.
Residential market and rental property: quality matters
In the areas surrounding Tallinn, energy-efficient homes up to 15 years old are in high demand. Although families remain somewhat cautious about taking on large financial commitments, the market favours well-designed and modern housing solutions. Prices have remained stable, but purchase decisions take time: it is common for buyers to sell their current property before committing to a new one.
The rental market is also showing signs of recovery: the number of transactions is growing and prices remain steady. That said, the rates of return are lower, especially for those who bought property at peak prices. Metsma notes that rental investors have become more selective: ‘There is increasing focus on whether the apartment suits the target group, with a preference for smaller units offering better rates of return.’
Flipping, i.e. increasing a property’s value through improved layout and quality, remains a popular strategy, particularly among experienced investors.
Signs of stability, moderate price levels, and competition among banks are creating an environment where informed buyers can make well-considered decisions. ‘Buying a home and taking out a loan both require careful thought, but with the right partner and transparent terms, that confidence is easier to achieve,’ Catlin Vatsel summarises.
