TALLINN, Nov 4 (LETA--BNS) - The real estate markets in Tallinn, Riga, and Vilnius each have unique characteristics, with Vilnius having the most active market and Riga the most affordable, according to Taavi Soorm, CEO of property developer Bonava Estonia.

"Riga is about one-third larger than Tallinn, but new apartment sales are at a similar level to Tallinn this year. Most transactions there involve Soviet-era apartments priced between 900 and 1,100 euros per square meter, which is nearly half the price of comparable apartments in Tallinn," Soorm said in a press release.

In Riga, the prices of new developments range from 2,100 to 3,500 euros per square meter. In comparison, prices per square meter in Tallinn are already over 4,000 euros.

"As older apartments make up a larger portion of the supply, apartments in Riga are significantly more affordable and accessible than in Tallinn and Vilnius. According to Swedbank, the average household can afford an 82-square-meter apartment in Riga, compared to 54 square meters in Tallinn and 50 square meters in Vilnius," Soorm highlighted.

Unlike in Tallinn and Vilnius, Riga's population is declining, which, according to Soorm, presents long-term risks for residential development there. However, since a large proportion of the real estate stock is old and depreciated, demand for replacing old homes with new ones remains steady.

Vilnius currently has the most active housing market in the Baltics. According to real estate insights platform Citify, 2,343 new apartments have been sold in the Lithuanian capital city this year, compared to 897 in Tallinn.

One distinct feature of Vilnius' new development market is that homes are sold as unfinished shells, according to Soorm.

"So, while the price per square meter for new apartments in residential areas of Vilnius is around 1,900 to 3,100 euros, buyers need to handle the finishing work themselves, which adds 500 to 700 euros per square meter," he explained.

Soorm noted that Lithuania's economy has been more resilient to recent crises -- its GDP decreased by only 0.3 percent in 2023 and is forecasted to grow by 1.5 to 2 percent in 2024. In comparison, Estonia's GDP contracted by 3.1 percent in 2023 -- the steepest decline among the Baltic countries -- and negative growth is also expected this year. Additionally, consumer confidence in Lithuania is higher than in Tallinn and Riga, contributing to Vilnius's significantly more active housing market.

"All three Baltic capitals have faced similar challenges, including economic decline, high inflation, record interest rates, and a complex geopolitical situation. These factors have reduced consumer confidence, housing affordability, and overall market activity. Although we are small and influenced by the market conditions of neighboring countries, the real estate markets in Tallinn, Riga, and Vilnius also have local characteristics that affect both developers and homebuyers. Naturally, we are all awaiting a market upturn as interest rates start to decline," Soorm concluded.