The popularity of this breathtakingly beautiful country stems from many different points: firstly the country is an economic success story. Having escaped the domination of Soviet rule back in 1991 it has since established strong trade links with Finland, Sweden and Germany and now has a GDP growth rate of around 6% annually. Secondly the government of Estonia is committed to the promotion of foreign direct investment and to this end it offers some impressive tax breaks to companies who establish themselves in Estonia.

Income tax is a flat 26% in Estonia making it one of the most competitive of all European nations and therefore more appealing for multinational companies seeking a base in Europe and more appealing for local and foreign employees. And finally, Estonia has a rugged and natural beauty and its natural landscape and friendly people are drawing more and more visitors to the country annually and so the tourism market in Estonia is growing quickly.

Property investors have been targeting the capital city of Tallinn where the majority of international companies investing in Estonia are establishing bases and where there is an increasing demand for quality residential and commercial property to rent, buy or lease.

Those who bought just three years ago in the most desirable districts have realized real profits in the region of 30%. These rates may not be sustainable over the longer term but prices and rental rates are set to keep on climbing because the demand for property outstrips supply and will likely continue to do so for quite some time.

A lot of the residential real estate in Estonia?s cities is old Soviet style apartment block units and these properties are not at all popular. More and more developers are constructing new and modern accommodation that property investors are snapping up and renting out to tenants or selling on to first time buyers or other property investors upon completion. Those who wish to buy these types of property pre-construction benefit from the fact they buy at today?s prices but take possession in 12 ? 18 months when the real value of the property has risen quite substantially.

Unlike in many other countries around the world, those who buy off-plan in Estonia usually only have to find between 10 and 20% of the property?s price during the build period because the majority is payable upon completion ? this makes it easier for a property buyer to save to afford a property or to flip upon completion and resell to realize the profits with which to pay the developer.

The investment property potential in Estonia is exceptional and anyone looking to diversify their real estate portfolio should consider this Eastern European country?s property market.

Posted by Eric Bradley on December 13, 2008 at 12:00 AM

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