Radisson hotel building sold for 46 MEUR

Eften Real Estate Fund II that belongs to Eften Capital has acquired the real estate and operator company of Radisson BLU Sky hotel in Tallinn for 46 million euros, Eften Capital said today.

In addition to the hotel and its operator Astlanda Hotelli, the fund acquired a 3,000 square meter office building and a popular pub, Madissoni.

The new owners plan no changes in the management of the hotel and it will continue to operate under the Radisson Blu brand.

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Maardu manor house for sale with a starting price of 2 MEUR

Maardu manorThe Eesti Pank executive board has decided to put the Maardu manor estate up for sale at a starting price of two million euros. The real estate company Colliers International Advisors OÜ has been chosen as adviser and manager for the deal.

“Owning the Maardu manor property does not fit with the principles of an efficient organisation, as Eesti Pank only uses the property rarely. I am certain that a private company will be able to put the manor house to better use. We also used our buildings in Kuressaare only rarely, but the Arensburg Hotel has made a success of its operations there and has created extra jobs in Saaremaa”, said the Governor of Eesti Pank, Ardo Hansson.

Eesti Pank considered various ways of using Maardu manor more profitably. One option was to look for a long-term tenant, another was to rent the manor house out more often. In both these cases the owner would have needed to make major investments to turn Maardu manor into a fully-furbished centre for tourism or training events. However, Eesti Pank does not have the skills needed to develop the manor properly and doing so is not one of the core responsibilities of a central bank.

An earlier obstacle to the sale of Maardu manor was that it stood on unreformed state land and could not be sold. Eesti Pank started the process of registration for this in autumn 2013 and it was completed in January 2015.

The central bank discussed Maardu manor with the Ministry of Finance and the national property office, but it became clear that the state had no interest in buying the property.

Eesti Pank took tenders from four real estate companies to find an adviser for the sale of the manor property. The lowest bid came from Colliers International Advisors, who will receive a fee of 9950 euros for successfully completing the sale.

Eesti Pank bought the Maardu manor property in 1993 for 320,000 euros.

In autumn 2013 Eesti Pank sold a property with two buildings in Kuressaare for 550,000 euros to Arensburg OÜ, which runs the Arensburg Hotel near to the central bank property. After selling Maardu manor, the central bank will only own the buildings at Estonia puiestee in Tallinn.

Source: Bank of Estonia

The construction price index rose 0.5 pct in 2014

According to Statistics Estonia, in 2014, the construction price index rose 0.5% compared to the average of 2013.

Compared to 2013, labour costs increased by 1.3% and the costs of building machines by 2.2%. The costs of building materials remained on the same level.

In the 4th quarter of 2014 compared to the 3rd quarter, the change of the construction price index was -0.2%; and compared to the 4th quarter of 2013, the change was -0.7%. Compared to the 3rd quarter of 2014, the index was mainly influenced by the depreciation of building materials, which accounted for more than three-quarters of the quarterly change. Compared to the 4th quarter of 2013, the construction price index was also mainly influenced by decreased material costs, which accounted more than 50% of the index decrease.

In 2014, the repair and reconstruction work price index rose 0.6% compared to the average of 2013: labour costs increased by 1.7% and the costs of building machines by 3.4%, while the costs of building materials remained on the same level.

In the 4th quarter of 2014, the change of the repair and reconstruction work price index was 0.1% compared to the 3rd quarter of 2014, and -0.4% compared to the 4th quarter of 2013.

The calculation of the construction price index covers four groups of buildings: detached houses, blocks of flats, industrial buildings and office buildings. The repair and reconstruction work price index covers office buildings. The construction price index expresses the change in the expenditures on construction, taking into consideration the price changes of three basic inputs: labour force, building materials and building machines.

Change in the construction price index, 4th quarter 2014
3rd quarter 2014 –
4th quarter 2014, %
4th Q 2013 –
4th Q 2014, %
TOTAL -0.2 -0.7
labour force 0.1 -0.6
building machines -0.7 0.4
building materials -0.3 -0.8
Index of detached houses -0.1 -1.0
Index of blocks of flats -0.3 -1.3
Index of industrial buildings 0.1 -0.5
Index of office buildings -0.2 -0.5

 

Change in the repair and reconstruction work price index, 4th quarter 2014
3rd quarter 2014 –
4th quarter 2014, %
4th quarter 2013–
4th quarter 2014, %
TOTAL 0.1 -0.4
labour force 0.2 0.1
building machines -1.5 0.8
building materials 0.1 -0.5

 

Sorce: Statistics Estonia

Requirements for housing loans

The requirements regulating the issuing of housing loans are intended to strengthen the resilience of borrowers and lenders against losses from unfavourable developments, and to reduce the chances of a real estate boom being caused by excessive lending.

From 1 March 2015 all the banks operating in Estonia will have to comply with three requirements when issuing housing loans. These limits are an LTV limit, a DSTI limit, and a limit on the maximum maturity of loans.

1) The LTV ratio is found by dividing the amount of a housing loan by the value of the property used as collateral for it. At the moment the decision to grant the loan is taken, the LTV ratio may not exceed 85%. The LTV ratio for housing loans with KredEx guarantee can be up to 90%.

2) The debt service-to-income ratio is found by dividing all the principal and interest payments that the borrower must make for loans each month by the monthly net income of the borrower. The calculation of the loan payments for loans with variable interest rates uses either the interest rate in the loan contract (base rate plus margin) plus two percentage points, or an annual rate of 6%, whichever is higher. At the moment the decision to grant the loan is taken, the DSTI ratio may not exceed 50%.


where n is all the credit agreements of the borrower including the new housing loan.

3) The maximum permitted maturity of a housing loan contract is 30 years.

Banks will have to abide by all three requirements when issuing new housing loans. To ensure that banks have sufficient flexibility in making decisions about lending and in assessing the risks associated with it, and thus to help make sure that the credit market operates as efficiently as possible, Eesti Pank will permit banks to issue up to 15% of their housing loans each quarter with conditions that breach the limits.

Requirements 1) Loan-to-value (LTV) limit for housing loans: 85%*
2) Debt service-to-income (DSTI) limit: 50%
3) Maximum maturity of a housing loan: 30 years

* Up to 90% for housing loans guaranteed by KredEx

Permitted exceptions up to 15% of the amount of housing loans issued by a credit institution in a quarter
Applies to all credit institutions operating in Estonia, including the branches of foreign credit institutions
Entry into force 1 March 2015

Source: Bank of Estonia

The Dwelling Price Index changed by 13.2 pct compared to last year

According to Statistics Estonia, in the 3rd quarter of 2014, the Dwelling Price Index changed by 4.1% compared to the 2nd quarter and by 13.2% compared to the 3rd quarter of 2013.

Compared to the previous quarter, the prices of apartments increased by 3.6% and the prices of houses by 5.4%.

Compared to the 3rd quarter of 2013, the prices of apartments have increased by 15.3% and the prices of houses by 7.9%. The prices of apartments increased in all three areas under observation: by 15.6% in Tallinn, by 12.8% in areas bordering Tallinn with Tartu and Pärnu cities and by 19.6% in the rest of Estonia.

Compared to the 2nd quarter, the price index of apartments increased by 4.7% in Tallinn, by 1.3% in areas bordering Tallinn with Tartu and Pärnu cities and by 2.7% in the rest of Estonia.

The Dwelling Price Index expresses the changes in the square metre prices of dwellings purchased by households. The Dwelling Price Indices have been compiled for apartments and houses (including detached, semi-detached and terraced houses).

In the 3rd quarter of 2014, the Owner-Occupied Housing Price Index changed by 9% compared to the 2nd quarter and by 13% compared to the 3rd quarter of 2013.

The Owner-Occupied Housing Price Index expresses the changes in the prices of the acquisition of dwellings new to the household sector and other goods and services that households purchase in their role as owner-occupiers. The index consists of four parts: acquisition of dwellings, other services related to the acquisition of dwellings, major repairs and maintenance, and insurance connected with dwellings.

The Owner-Occupied Housing Price Index is published on the base 2010 = 100. The time series starts from the first quarter of 2005; major repairs and maintenance are included from the first quarter of 2007 and insurance connected with dwellings is included from the first quarter of 2012. The annual index is calculated as the average of four quarters.

Source: Statistics Estonia

Construction volumes decreased in the 3rd quarter

According to Statistics Estonia, in the 3rd quarter of 2014 compared to the same quarter of the previous year, the total production of Estonian construction enterprises in Estonia and foreign countries decreased 8%. The construction volumes have decreased for four quarters in a row.

In the 3rd quarter of 2014, the production value of construction enterprises amounted to 640 million euros, of which the production value of building construction was 369 million euros and the production of civil engineering totalled 271 million euros. Compared to the 3rd quarter of 2013, the volume of building construction in real terms decreased 3% and the volume of civil engineering 14%.

The domestic construction market continues to be influenced mostly by the decrease of civil engineering volumes. In the 3rd quarter of the current year, also the repair and reconstruction volumes in building construction took a downturn compared to the same quarter of the previous year.  At the same time, new building construction continued to grow.

The construction volume of Estonian construction enterprises in foreign countries decreased about a fifth compared to the 3rd quarter of the previous year, influenced mainly by the construction of buildings. Construction volumes in foreign countries accounted for 7% of the total volume of construction in the 3rd quarter of 2014.

According to the data of the Register of Construction Works, in the 3rd quarter of 2014, the number of dwelling completions was 432, i.e. the same as in the same period of 2013. More than a half of the completed dwellings were situated in one-family, two-family or terraced houses. The majority of completed dwellings were situated in the neighbouring rural municipalities of Tallinn.

There is still a demand for new dwellings with a good location and high quality. In the 3rd quarter of 2014, building permits were granted for the construction of 945 dwellings, which is a third more than in the 3rd quarter a year ago. The most popular type of building was a block of flats.

The number of completed non-residential buildings was 181 with a useful floor area of 181,000 square metres – this was primarily made up of new agricultural, storage and industrial premises. Compared to the 3rd quarter of 2013, both the useful floor area and the cubic capacity of the completed non-residential buildings increased.

Diagram: Construction volume index and its trend

Source: Statistics Estonia

Saaremaa businesses eyeing 25 MEUR conference center

A group of businesspeople are planning to build a 25 million euro concert and conference venue in the capital of the Estonian island of Saaremaa and are hoping to raise the necessary money from local businesses and EU funds.

“Even though the planned center is not tangible reality yet, negotiations are under way and Saaremaa businesspeople have a firm intention of building a center for international events namely in Kuressaare or near it. The aim is to host at least 40 international conferences per year, which would bring the region some 12 million euros of additional revenue,” Tullio Liblik, member of the group, said in a press release.

The main hall of the multifunctional concert and conference center would have a capacity of 1,600 seats and an overall capacity of up to 4,390. In-between major conferences it would serve as a theater, a venue for concerts, exhibitions and receptions. In addition to the main hall the facility would have several smaller conference and rehearsal rooms as well as a planetarium.

Liblik said that while the decision about the location has yet to be made, several potential sites on Kuressaare’s fringes or just outside the city boundaries were being considered. The initial draft places the center on the shore of Poduste River near the Kuressaare golf center, with a view of the sea and Kuressaare Castle.

A competition for the architectural design will be held once the detailed plan has been approved, Saare County Governor Kaido Kaasik said.

Source: BNS via Estonian Review

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