New real estate index shows signs of recovery in East European cities

Prices in Tallinn, Estonia, and in Riga, Latvia, passed the bottom point in the third quarter of 2009, while prices in Vilnius, Lithuania, only passed their bottom point in the second quarter of this year, according to a new property index from real estate advisors Ober Haus.
 
 It also shows that property prices in Estonia and Latvia started falling six months earlier than in Lithuania.
 
In Latvia, which suffered the worst recession in the European Union with an 18% Gross Domestic Product collapse in 2009 and required an International Monetary Fund led €7.5 billion bailout, residential prices fell 63.4% from their May 2007 peak. But they have since recovered and have grown 6.7% in the capital Riga in the last 12 months, to reach €906 per square meter, some 61% below their peak, the index shows.
 
In Estonia, where GDP fell 14% in 2009 but will grow a projected 2.5% in 2010, actual transaction values in Tallinn rose 17.6% during the past 12 months, bringing the average price to €921 per square meter. However, prices are still down 46% since the 2007 peak. ‘The upcoming introduction of the euro on January 1, 2011, along with the rise in consumer confidence and drop in unemployment are continuing positive signs for residential prices,’ the report says.
 
In Lithuania the drop in real estate prices started later but GDP also fell 15% in 2009 and prices are now down 40% from their December 2007 peak. Prices in Vilnius have been rising for four months now but are still down 4.9% for the last 12 months and now average €1,180 per square meter.
 
A separate index for Warsaw shows that apartment prices were off 0.2% in September, bringing the average price down to 8,303 PLN per square meter, around €2,082 per square meter.
 
During the past 12 months apartment prices have declined just 2.5%. Since the values reached their peak in August 2007, prices for apartments in Warsaw are down 9.8%. That drop is significantly less than the price drop in other Central European capitals, like Prague, down 18%, Bratislava, down 17% and Riga, down 61%, and is roughly the same as the price declines in London. In comparison to other European peers, Warsaw apartments have held their value well, the index shows.
 
The expected rise of VAT in Poland on new apartments from 7% to 8% in 2011 will also put a slight upward pressure on all apartment prices, as new apartments will cost 1% more, it adds.