The Unassuming Economist

The IMF’s latest report on Estonia says:

“Residential real estate market activity has increased, but prices remain well anchored to income and nominal GDP growth (figures below). The number of transactions in 2017 rose by
8 percent compared to the level in 2016 and the real estate price index increased by 5 percent, driven partly by the growing share of new apartments. Going forward, the number of permit applications suggest construction activity should be sufficient to just maintain the current housing stock.”

 

 

The report also says that: “Housing market trends, both domestic and abroad, are important drivers of banking sector developments in Estonia. While household indebtedness is moderate, banks’ extension of housing loans accelerated in 2017. Higher interest rates following an eventual monetary policy normalization could pose a risk for household finances and potentially affect future financial developments and economic growth. In addition, developments in cross-border banking linkages indicate that potential spillovers from vulnerabilities in Nordic parent banks, notably the Swedish real estate sector, require further safeguards for financial stability, notably in cross-border banking supervision through the Nordic-Baltic cooperation platform.”