Drivers of Estonian Housing Market Cycles

Veronika Aus, Ene Kolbre, Kristian Kahre


The aim of this study is firstly to define the housing market cycles of the Estonian market through the analysis of price and transaction volume dynamics and secondly, to postulate factors that have the most substantial influence on real estate prices in the new market growth phase. The authors have applied a Honeycomb cycle, theory-based method to analyse the cyclical nature of price and volume interactivity and present regression analysis as a basis of a dedicated econometric model.

The study concludes that changes in the housing market are firstly reflected in the activity of transactions and then in prices — which is confirmed by the data that has been collected. On the Estonian housing market, the main factors influencing apartment prices have substantially changed in the process of convergence, when comparing the current growth levels to those of the growth phase witnessed before the economic boom, and are now much more akin to the primary factors found in more developed markets.

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