Property prices have risen faster in the Baltic States than anywhere else in Europe over the past few years. But now they are close to the levels in Stockholm, Helsinki and Copenhagen.
The Baltics have till recently been Europe’s hottest residential investment destination, with Estonian house prices (e.g.) rising 556.41% between 1997 and 2006, and 245.95% in the past five years. But residential property in the Baltics is now expensive. Apartments in capital cities are priced at around the same level as in Copenhagen, Helsinki and Stockholm, according to research by the Global Property Guide.
Why have Baltics’ property prices surged so strongly? Research suggests that long term property price rises are strongly correlated with high GDP growth rates (though there are many other additional factors). The list of European countries which in the past five years have experienced high per capita GDP growth is, unsurprisingly, headed by Latvia, Estonia and Lithuania – which all experienced above 8% GDP per capita growth (as did Belarus, where however foreigners cannot buy).
In future, house prices in the Baltics are likely to rise more slowly than in the past, the Global Property Guide argues in a report published this week. Gross rental income (yields) have fallen to moderate levels. Further, the financial authorities can be expected to discourage excessive house price inflation.
