Estonian housing market: affordability problem and regulatory framework

Angelika Kallakmaa and Ene Kolbre

ERES from European Real Estate Society (ERES)

Abstract: The Estonian economy has quickly adjusted to new circumstances brought about by the global crisis. Weak domestic demand due to the decrease in incomes and worsening situation in the labor market is still the main source of negative impact on the economy. But the Estonian economy began to grow again in the fourth quarter of 2009 and already in 2010 the economic growth was stronger than expected. The recovery is mostly based on exports. Since January 2011 Estonia is the 17th member of EMU. The development of the housing market was rapidly growing until 2007: demand exceeds supply for housing; bank finance allocated to real estate was very high comparison to total lending etc. The end of the housing boom shows that there is a need for more attention to the housing affordability problem. Situation in the real estate market changed in 2008 and it seems to be more stabilized in 2011, but the questions about the affordability of housing still remain. This article seeks answers how to define housing affordability for Estonian housing market. Also describes the regulatory framework and policy decisions made by the government. It is difficult to measure regulatory frameworks impact to the housing market, but are the Estonian households able to afford the housing? The article seeks the answer on how to evaluate the current situation and prognosticate potential development trends.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2011-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2011_133

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