Estonian housing market after crisis: Searching for origins of the demand change

During the last decade the Estonian housing market has experienced a rapid growth, decline and stabilisation phase and started on a new rise. The study seeks to discuss the effects of changes in the economic environment on the Estonian housing market; outline the dynamics of the housing market during and after the crisis and assess this using ratio analysis. The end of the housing boom also shows that there is a need for greater attention to the housing affordability problem. To analyse housing affordability the HAI index constructed for the Estonian housing market was used. Next to affordability problems a new real estate market rise has arisen real estate quality and assessment related problems. The Analytic Hierarchy Process (AHP) method and questionnaire of the market participants was used for evaluating the hierarchy changes of the factors influencing the quality grade of the real estate object, Results of the research show that the situation in housing market stabilised at the end of 2010 and moved into slow growth in 2011. The P/I and P/E ratios prove that the situation has improved since the real estate bubble burst. Constructed HAI model, that chacterised the repayment affordability, shows that the situation has improved in 2009-2011 and faster improvement was in the repayment affordability situation compared to that of the purchase affordability index. Research results, based on the Analytic Hierarchy Process method, show a clear hierarchic changes of the factors influencing the quality rating during last years.