Estonia property

I am back out to Estonia this weekend for my second trip in 2 weeks - and will be bringing the exact details of a deal I have just secured, and more photos on my return.

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Well I am amongst the many fans of Eastern Europe, as the potential is quite incredible � and when I started researching more I felt the Baltic nations offered some excellent opportunities � and yet are hardly mentioned in the UK.

Established yields, with an effective and efficient management/letting option for buy to let investors

These may all seem straight forward and pretty obvious, but the established yields is one that is often forgotten when investors are looking at newer, less established markets. As I mentioned in a previous article, cashflow is very important for me � and therefore I am looking for rental yields that will at minimum cover the cost of borrowing and owning the property, so there is no pressure to sell - and therefore you are in a strong position to enjoy the capital growth. But before I consider investing in Estonia property is Estonia safe, I was asked before I left on my first trip? And where exactly is it?!

Lets take the first question � clearly this is a key consideration for any investor ie how much risk am I taking?

The World Bank and International Finance Corporation, the private sector arm of the World Bank Group, co-sponsor a report called the �Doing Business Report�, which puts together an annual league table ranking 155 nations on key business regulations and reforms for �The ease of doing Business� and their economy, and is based on the efforts of more than 3,500 local experts � business consultants, lawyers, accountants, government officials, and leading academics around the world, who provide methodological support and review.

�New Zealand has the most business-friendly regulations in the world, as measured by the Doing Business indicators. Singapore is the runner-up. The United States is third. Five other East Asian countries -- Hong Kong (China), Japan, Thailand, Malaysia and Korea -- are among the top 30. So are the Baltic countries -- Lithuania, Estonia and Latvia. Their ranking is a remarkable achievement, as only a decade has passed since they first implemented reforms.�

Just to give an idea of where some established countries finished � Spain are 30th, France 44th, and Italy 70th!!

Does this mean anything? Well alongside the fact that the economy is growing so quickly, the mortgage market is growing so quickly, and the house prices are relatively low then this is an excellent sign for Estonia property.

This is another key reason why it is such a good place to invest. Estonia sits to the left of Russia, and just below Finland, separated only by the Gulf of Finland. Below Estonia is Latvia and Lithuania � but it is the relationship Estonia has with Finland which is the most important for Estonia.

Estonia in many ways identifies itself more with its Nordic EU neighbours across the sea than with the two other Baltic countries, which is clearly an excellent sign for the Estonia property market.

Finland along with the other Nordic countries, have moved to Estonia to cut costs and become more competitive at home and around the world. In fact, 74 percent of the total FDI in Estonia is from the Nordic countries. This is more likely to bring Estonia in line with these countries in terms of wages and GDP, again showing why now is the right time to invest in the Estonia property market.

- A strong Scandinavian summer tourist market means the country is attractive for foreign property investors.

- Opportunity to borrow at interest rates of around 3-4%! This makes it very favourable lending conditions for overseas investors with the mortgage application very straight forward. Estonian banks are also prepared to lend Estonian nationals up to 95 percent of the value of the property, provided the monthly payments are no more than 40 percent of their take-home pay which shows that property is affordable for the local population � again an excellent sign for investors in Estonia property as it ensures a strong local market.

- Clear land ownership. There are no problems buying Estonia property when it comes to land ownership. Local authority and government databases have all Estonian land registered so there is no way an individual can claim what you have rightfully bought.

- Huge increases in tourism, with huge increases still to come. Foreign accommodated tourism in Estonia increased by 30 percent in 2004 compared to 2003 from 1.05 to 1.36 million tourists making it Europe�s fastest growing tourist destination. If we compare Helsinki which has 8000 hotel rooms, and is comparable in population size to Tallinn, which has only 3,000 hotel rooms we can see there is plenty of growth still to be seen.

Already, there is a massive shortage of hotel accommodation during the peak summer periods, to such an extent it�s impossible to find a hotel room at the last minute.

For the small investor in the Estonia property market, this means there�s a great opportunity for holiday apartment rentals.

- Prices are cheap - A beer is 50p, a three-course-meal is from �10 and taxis are around �2 � and for a Scotsman this is particularly good! We ate in an excellent Italian restaurant for �15 for two of us in Parnu.

- Property prices will increase in line with wages, which are increasing 10 percent a year. At the moment Estonian wages are just 20 percent of the EU average. - By 2008 Estonia plans to become completely wireless - that�s the entire country connected via wi-fi. They will be the first country to achieve this in the world which shows they are technically very advanced.

- The budget airline factor - Easyjet are now flying to Tallinn from just �3.99 one way. In addition, Estonian Airlines have reduced air fares by approx. 40 percent. This has had a huge impact on the number of travelers already � I traveled on Easyjet for �100 return, and only booked my flight 2 days before travelling.

Tallinn has some excellent opportunities for investors � as have some of the secondary towns. I spent 3 days in Parnu, the summer capital city of Estonia before meeting contacts in Tallinn.

Parnu has an excellent beach � along with some fantastic culture, and some beautiful architechture, but don�t just take my word for it - Janet Street-Porter recently reviewed Estonia in the Independent, where she said,

��.the real attraction in P�rnu is the wide, sandy beach. It lies at the end of a beautiful park, reached by a series of wide, leafy avenues of lime trees bordered by swanky villas, mostly built in the Twenties and Thirties for rich Germans, Swedes and Russians who would come here to play.

P�rnu hosts a series of musical, film and cultural events in the summer, from concerts to ballets and plays. The town feels like a sleepy Baltic version of Santa Barbara - a place where the wealthy came to gamble, take the spa waters, indulge in mud baths, drink and dance.

Tallinn is a wonderful city but to really discover Estonia you need to rent a car and visit the islands before indulging in a sumptuous weekend in P�rnu. You won't run into many other Brits, that's for sure, and you can always work off the wine and food with a bike ride or a brisk swim off the ladies-only beach.�

As I said I am back out again this week, as we have just finalised a deal for investors � and I am finalising details with the banks and the letting agent. We have secured 10 apartments at a discount � although I had already taken 4 reservations before had even completed the deal such has been the interest in the Estonia property market - and we will assist investors all through the buying process with our contacts out there. What I liked with these apartments is that the other buyers are Finnish and Estonian � and they are either buying to live in, or as a summer home. Therefore you are not competing with any other buy to let investors for tenants � and there is a clear exit strategy ie selling to the local market.

With current yields of around 7-9% - giving a net yield from day one allowing us as investors to enjoy the capital growth in a country that is seeing huge capital growth of at least 10% for the next 5 years.

I feel this is an excellent deal that will cover its costs through the duration of the investment through the already established rental market, and allow investors for a small investment - of around �10-15,000 per property - to enjoy the growth of a fast growing, safe and lucrative market.

For me the Estonia property market ticks all the right boxes - safe place to invest, low cost of borrowing, economic growth, and an established rental market.

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