* Rising employment and higher wages, coupled with low mortgage rates, are fuelling domestic demand for property in Estonia. Foreign investors are also driving demand, particularly the Finns who are buying second homes. Property prices in Tallinn are a third of those in the Finnish capital Helsinki, only 55 miles away, although they are catching up fast.
Central and historic parts of the capital, Tallinn, have seen strong price growth over the past few years having gained up to 20% in the past year, and investors are looking to the suburbs. Most new developments in the city centre sell from plan. A new pied-a-terre in a classy purpose-built block in central Tallinn, within walking distance of the old town, costs from £56,700. A similar price buys an apartment in a historic converted paper mill, near the commercial district, overlooking Lake Ülemiste.
Or, you could buy a small flat in a new scheme, set amid woodland, within walking distance of the city centre, for £46,350. A des-res in affluent, suburban Viimsi, not far from the beach, costs from £38,974 for one bedroom. Agents say the area appeals to young professionals and small families.
VAT is levied at 18% on the purchase of new property in Estonia, but this is generally included in the purchase price. Rental income is taxed as personal income at 23% ; any mortgage interest is tax deductible. Stamp duty is paid on a sliding scale from 0.3% to 0.5%. Land is tax at 0.2% 6o 0.7%. No capital gains tax to pay on resale and no inheritance tax.