BONJOUR L'ESTONIE

Sell apartments, buy stocks !

Stefan Andersson
private investor

Do you own an empty Tallinn apartment ? Sell it, and buy Arco Vara, Eesti Ehitus or Merko Ehitus shares !

Estonian residential real estate has lost its attraction as an investment object. As long as prices moved in one direction, there were people willing to hold apartments for investment purposes, but since rental yields are low, that market is now suitable only for pure speculators.

For cultural reasons, Estonians do not want to rent their homes, but to own them. Therefore apartments trade at low yield levels. On top of that, the rental market is dominated by private individuals who own one or very few apartments, and probably in some cases forget to pay taxes on their rent income, thus distorting the market. These factors preclude large-scale long-term investments into Estonian residential real estate. 

So, whereas for instance in Sweden some private investors have become billionaires by renting out apartments, this will seemingly not happen in Estonia. In my view, the idea of private ownership of homes is generally preferable to renting. Apartment dwellers care more when they are also the owners. However, also a functioning rental market is an indispensible part of an efficient market economy. And pension funds or other larger financial investors arguably have fewer investment opportunities in Estonia.

Thus I see no rationale for private individuals to own empty or low-yielding apartments in Tallinn for investment purposes. Let us consider a standard apartment at the value of EEK 2 mln. Probably the annual rental yield today would be some EEK 100 thousand or 5 pct.

With the same EEK 2 mln that investor may today acquire: 200 thousand Arco Vara shares, or 40 thousand Eesti Ehitus shares, or 15 thousand Merko Ehitus shares. Incidentally, these shareholdings would make the investor the 20th to 50th largest shareholder in the mentioned companies. The market prices of these shares have fallen by 50-70 percent during the last 12 months. Of course their future financial return will be subject to a variety of risks, but judging by history, probably by far outpacing that of the apartment investment.

So, even though apartment prices have fallen, rental yields will probably stay low. And right now there are opportunities, at the price of only one standard apartment, to grab proportionally large stock positions in Estonia's major construction and real estate companies. I think that investment choice should be quite easy. So, rather than owning real estate, own the producers of real estate !

And share them with Toomas ....

Estonia should thank the Soviet Union for its economic success

Gertrud Levit
gertrud.levit @ aripaev.ee

A Russian portal expert.ru recently published an interview with Hanon Barabaner, rector at Institute of Economics and Management (ECOMEN) in Sillamäe.

“The notable economic success during the first years after the Baltics gained independence was established already in the Soviet Union. At that time, Baltic States were a sort of window to the West for the Societ Union. More resources per capita arrived here than in other Soviet Republics. [-] That is why living standards here were highest in the entire Soviet Union,” Eesti Ekspress quotes what Barabaner had said.

Professors Barabaner thinks that after the money reform in 1992, the speed of economic reforms in Estonia slowed considerably and that the reserves to operate we had stored had to end sooner or later. That is what, according to him, has happened in recent months.

Barabaner isn’t optimistic about the future. According to him, the bureaucracy of the EU is stalling Estonia’s economic growth, as “according to many experts the bureaucracy is significantly more complex than it was in the Soviet Union”.

City of Tallinn only pretends to fight against casinos

Sandra Taimre
sandra.taimre @ aripaev.ee

Closing a Play-In casino on Mere road in Tallinn failed completely. Instead of decreasing the number of casinos, there will be even more casinos on Mere road.

The Tallinn city government ruled by the Centre Party represents itself as fighter against the casinos. In March, the city government announced that they propose not to lengthen the license of a Play-In casino on Mere road, Eesti Ekspress writes.

However, at the end of the May, the Tallinn city government lengthened the license of Play-In casino for two years. 

In addition, a “positive news” announces that the gambling company Novoloto or Admiral chain will close one of their casinos on Pae street and gave up of lengthening the license of a casino on Pärnu road. However, in return, the company received permission to open two new gambling spots on Mere road !

If this is counting ... !

Who are poorer than Estonians ?

Gertrud Levit
gertrud.levit @ aripaev.ee

The level of relative poverty in Estonia is 19.5 pct according to the data of Statistics Estonia in 2006, but in a number of developed countries the level of relative poverty is even higher, aripaev.ee quotes Russian business newspaper Delovõje Vedomosti.

There are two types of poverty – relative poverty, determined by comparing the incomes of households with the medium level of society, and absolute poverty, determined by comparing the income level of households to standards set for the state (and year) by experts.

Relative poverty is determined like this: 6000 people are questioned and their equivalent net income during a certain period of time is learned (for example, provider is 1; another adult family member is 0.5, children 0.3).

All incomes are listed from lowest to highest and the medium is found. Then 60 pct of that medium is calculated, and the result is the limit of poverty. People whose income is below that limit live in relative poverty.

Despite the fact that the indicator of poverty increased a bit in Estonia when compared to the previous year, we aren’t much different from the medium of Europe. According to the data of Eurostat, in 2006 the level of relative poverty in EU’s 25 member states was 16 pct. At the same level with Estonia – 19 pct – were the United Kingdom, Poland, and Rumania. In Italy, Lithuania, and Spain 20 pct of people lived in relative poverty, in Greece 21 pct, in Latvia 23 pct. The situation is best in Czech, Netherlands, and Iceland, where the rate of relative poverty is 10 pct.

Misdemeanor for crash pilot !

In cooperation with BNS

TALLINN - The amateur flier who piloted the small aircraft that crashed in South Estonia last week is highly likely facing a misdemeanor proceeding as he did not have  a pilot's license and the plane was not entered in the aircraft register.

As with ordinary planes, a superlight aircraft has to be entered in the register for operation, but the crashed plane was not, the head of the Civil Aviation Administration's legal department, Gerli Rebane, said. An aircraft also has to be certified airworthy by the administration.

"As the aviation administration has not yet started a misdemeanor proceeding, it's not possible to say at this point which requirements the crashed aircraft met or did not meet, but that will be established in the course of the misdemeanor proceeding," Rebane told BNS.

A a person also needs a pilot's license in order to fly a superlight aircraft which the man did not possess.

The aviation authority will be able to launch the misdemeanor proceeding after the police have completed the criminal probe into the crash. Prosecutor Milvi Vain from the regional prosecutor's office said the case will be closed soon because the person who caused the accident was the only one injured in it.

Authorities start checking outdoor bars for nighttime noise

Toomas Hõbemägi

City of Tallinn authorities have started checking complaints that outdoor cafeterias and bars are disturbing local residents by making noise late in the evening.

Postimees writes that by city regulations, catering facilities such as street cafes in Tallinn Old Town must make sure that there is no noise after 11 pm. Since summer nights are warm, several cafeterias and bars have decided to keep their outdoor terraces open and keep serving customers also after 11 pm.

Mart Tomson who manages Pegasus cafeteria in the Tallinn Old Town says that while in Europe street cafeterias are allowed to keep serving customers as long as there is even one customer, Tallinn is moving in the opposite direction.

“Nights are warm and customers would like to sit outside by midnight. Perhaps residents of Tallinn Old Town should understand that this is not the place for enjoying peace and quiet,” said Tomson.

Developers continue to invest in new logistic centre near Tallinn

Toomas Hõbemägi

Although the real estate market is in doldrums, developers continue to invest in logistic centres and industrial parks near the capital city.

Eesti Päevaleht writes that since the number of companies that plan to move their offices and production facilities from the city to outskirts has been increasing, there has always been more demand than supply.

With such established industrial parks as in Jüri and Tänassilma, developers have started to build a logistics centre in Jälgimäe. The developer Estconde-E says the total cost of the project could amount to 200 million kroons.

However, Urmas Niine who represents Kodu Grupp that develops the Jüri industrial park, says that some companies which a year ago were ready to move out of their current premises have postponed the move because of the economic slowdown.

“I believe that this fear will disappear by next year,” said Niine who says that developers need to bind tenants with contracts before investing millions in real estate.

Food basket more expensive in Tallinn than in New York but a Big Mac is cheaper in Estonia than in USA

Sandra Taimre
sandra.taimre @ aripaev.ee

Newyorkers have to pay less for the chicken filet, eggs, cheese, orange juice and other food products than Tallinners, the price comparison shows.

According to Statistics Estonia, minimum gross wage in Estonia amounts EUR 278 (EEK 4,348), in US EUR 696 (EEK 10,855), SL Õhtuleht mediates Ilta-Sanomat.

The prices in Tallinn are also beaten by the prices in Finland even though the prices of food products have increased there 14 pct y-o-y. Five years ago, the prices of food product in Estonia were 65 pct cheaper than in Finland.

According to Eurostat, the cheapest food basket is in Macedonia and Bulgaria, the most expensive in Denmark.

The Big Mac Index
Sandwiched

Analyzing corruption in Estonia

Vitaliy

Transparency International’s (TI) methodology was recently applied at the local level in Estonia in order to analyze levels of corruption in that country’s regions. The results are that :

Estonian residents perceive corruption the most urgently in Northern Estonia…Ranking next in terms of corruption perception was Southern Estonia, Eastern Estonia and Western Estonia.

This is good news for at least two reasons. First, Estonia’s government now has concrete data that it can use to target its anticorruption resources. Second, and from my point of view a much more welcome development is the application of TI methods at a sun-national level of analysis. Although knowing a country’s corruption score is helpful, especially if it is available over a number of years, that single score fails to capture the whole picture inside a given country.

TI has provided a great service by continuing to commission and compile an annual Corruption Perceptions Index (CPI), but those who take this a step further and investigate corruption within their state do an even greater contribution toward decreasing corruption.

More of this kind of research is hopefully on the way in other Eastern European states.

"Young Conservatives” of Estonia wants State to stop financing abortions

Juhan Tere

Young Conservatives, the youth organisation of Pro Patria and Res Publica Union, wants Estonian State to stop financing elective abortions, writes the National Broadcasting.

The political youth organisation issued a statement, condemning the attitude which tries to view abortions as women’s freedom. In their opinion abortions destroy human lives and Estonia has not fulfilled its Constitutional obligation to ensure effective protection of lives of unborn persons.

Young Conservatives feel that the first step to be taken is to stop State financing of abortions.

“Each year millions of kroons of taxpayers’ money is spent for supporting this practice that is ignoring human rights and destroys the Estonian nation by financing abortions from the State budget,” stated the organisation.

The statement noted that financing so-called elective abortions from the State budget is legally reprehensible and politically unjustified in the context of the Constitution.

Member of Tallink board suggests admiring Finnish engineers

Gertrud Levit
gertrud.levit @ aripaev.ee

Estonian experts find that economy in Finland is more stabile than in Estonia and that we should admire the engineering skills of Finns, writes postimees.ee.

Member of the board of Tallink, Toomas Vilosius, who helps run the company over the Finnish Gulf noted that media has created colourful fantasy pictures of Finnish economy.

“I would like to point out that a few days ago a Finnish newspaper published a story comparing the situation in Finland to an economic crisis,” Vilosius said yesterday. “Both viewpoints are wrong – whether it’s written that everything is going badly or that everything is very good, with a surplus of half a billion in the state budget.”

“If companies and the state try to be economic, then it’s not a crisis, it’s a normal situation,” Vilosius, who reads reports of economic crises in Estonian newspapers daily, commented. “Economy can’t rise forever, a small fall is normal.”

Vilosius noted that if Estonia should truly end in a crisis, we should learn from the experience Finland has of how to come out of economic low point swiftly. Finland should also be an example with its level of technology level and skills of engineers.

Drunk Russian swims across border

Tallinn - Authorities in Estonia are mulling what to do with a 45-year-old Russian picked up drunk and sodden after swimming illegally across the European Union and Schengen zone borders.

The man, identified only as Sergei, lost his passport while on a trip to Russia and was trying to get back to his home in Sillamäe, a small town in north-eastern Estonia near the Russian border.

A bridge spans the 150 metres of water that separates the Russian town of Ivangorod from the Estonian town of Narva on the far side of the river of the same name.

Most of Narva's 67 000-strong community are Russian-speakers. Many cross the bridge daily to shop on the Russian side. The Russian citizen will not face criminal charges, but could be fined for breaching the EU and Schengen zone borders, officials said.

Kyrgyz financial intelligence cooperation

Jyldyzbek IBRALIEV

Kyrgyz Financial Intelligence intends to tune cooperation with similar agencies of Afghanistan, China, Moldova and Estonia, Maksatbek Sadyrov head of the Kyrgyz Financial Intelligence Service told the President Kurmanbek Bakiev today.

Sadyrov has also presented a semiannual operations report and outlined objectives for the second half of 2008.

Bakiev in his turn noted that the main aim of the financial intelligence in proceeds’ laundering control should be focused on strengthening cooperation with relevant governmental and bank-financial structures within the country.

Estonia debates same-sex partnerships

Phoebe Ferris-Rotman

The Ministry of Justice in Estonia is preparing a draft law which would allow same-sex partners to register their cohabitation.

Estonia has been a member of the EU since 2004. Homosexual acts were decriminalised in 1999.

Details are not yet being revealed but amendments to inheritance, property rights and citizenship will be included.

Unmarried heterosexual couples could also benefit from the draft law.

In December 2005, a new Family Law proposal by the Estonian Ministry of Justice explicitly stated that marriage is exclusive to heterosexual couples.

There was an outcry from gay activists, which sparked much public discussion of the subject. Various right-wing parties have opposed any extension of matrimonial rights to gay and lesbian couples.

Padaste Manor spa

Strip off for a Baltic island seaweed and hay bath that won't break the bank

Jane Chambers

THE MISSION To leave husbands and children behind and to shed the crocodile skin, no amount of self-help could shift.

USP Herbs picked from the surrounding forests and fresh local ingredients are all part of the ethos of Padaste Manor. In a world where money can buy you any brand you want, this is something different.

AMBIENCE Nestling on the edge of the Baltic Sea, the recently renovated Padaste Manor is all about big skies, seclusion, and understated luxury. When you arrive your eyes are pulled towards the wooden sun deck inviting you to venture out in a little boat to a neighbouring island or to stay and luxuriate in a seawater hot tub.

The spa is housed in a country lodge, which has thoughtful little touches such as creamy sprays of cow parsley and other wildflowers throughout the rooms and water beds to relax on between your treatments.

Tax Board of Estonia ordered additional payments of 330 million kroons

Juhan Tere

The Tax and Customs Board carried out more than 7,200 checks on taxpayers in the first half of the year 2008 and ordered total of more than 330 million kroons of additional amounts to be paid, writes äripäev.ee.

Head of the supervision department of the Tax and Customs Board Egon Veermäe state that major violations that appeared during checks concerned, yet again, tax calculations reflecting fictitious bills.

The institution states that the number of checks that end with a discovery of a violation is still high, reaching 80 per cent of checks carried out.

In fighting against value added tax frauds, the tax administration has discovered a total of 263 cases in the first half of the year where people who wanted to be entered into the VAT register did not operate enterprises that actually worked.

The Tax and Customs Board is also prioritising prevention of paying undeclared wages. In the beginning of the year, the board selected 1,000 enterprises in the case of which there is a high risk of paying undeclared wages. The enterprises were sent memorandums, informing them of uncompetitive wages paid to employees in comparison to the average level in the region and in the relevant sector.

“46% of recipients of letters improved their payment of taxes after the information was sent to them,” said Veermäe. The most efficient solution was informing both the enterprise as well as its employees of the problem.

New model of Victory Monument in Estonia is completed

The model necessary to achieve the best end result of the Victory Monument of the War of Independence of Estonia was completed on Tuesday and will be made public on Wednesday or Thursday, writes the National Broadcasting.

The head of the foundation established for building the Victory Monument Aivar Reivik stated that on Wednesday the model will be taken to the Ministry of Defence where representatives of the City of Tallinn are invited to look at it. On Thursday the model will be introduced to the public.

Estonia's new health plan focuses on raising life expectancy

The Estonian government endorsed a public health development plan for the 2009-2020 period aimed at raising the average healthy life expectancy to 60 years for men and 65 years for women, and the average life expectancy to 75 years for men and 84 years for women.

The plan deals with health policy on the level of the whole society rather than just one ministry. "It's clear that health is not supplied by a doctor who writes out a prescription for it and then you go and buy it in a pharmacy," Social Affairs Minister Maret Maripuu said.

"The state, local self-governments, the private and the third sector, and people themselves must all together see to the good health of the population," the minister said.

Recent years' developments in public health have been positive -- the birth rate has risen and the lifespan has lengthened, she observed.

As a result of the last decade's developments, the Estonian public health system has become one of the most cost-effective in Europe. But the gap with West European and Nordic countries, whose level is a guiding mark to Estonia, is still wide and population growth remains negative.

The overall objective of the development plan is to increase the number of years of healthy life by reducing the premature death and sickness rates.

Estonian officers captured almost 80 illegal border crossers in the first half year of 2008

Estonian border guards captured 78 illegal border crossers in the first half of this year, most of them on the eastern frontier.

The director general of the Border Guard Board, Roland Peets, told the border service established in the six months 60 cases of illegal border crossing and detained 78 illegals.
Sixty-two illegal border crossers were caught on the border with Russia and 16 at the air border, i.e. at the Tallinn airport.

From January 1 till July 9 border guards detected 16 persons who sought to enter Estonia with fake documents.

In 13 cases involving five nationals of Colombia, four Chinese, two Peruvians, one Senegalese and one Nigerian forged Schengen visas were used. In addition, three Jordanian citizens attempted to enter Estonia on the strength of counterfeit Belgian residence permits.

In the first half of 2007 border crossers presented forged papers in 11 instances.
Looking at the statistics for the first half of 2008, using counterfeit documents, crossing the border illegally in areas between crossing points, and entering Estonia legally but staying here with a view to taking up illegal residence and finding a job remain the main methods of illegal immigration.

In January-June 34 percent more illegal immigrants were captured than during the same period last year, Peets observed. The respective numbers are 30 and 23.

Border guards also detained 78 wanted individuals at the border in the six months.

Estonian Air adds flights between Tallinn and Stockholm from September the 1st

Starting from September 1, Estonian Air will add to the schedule flights between Tallinn and Stockholm with departure from Tallinn at 16:20 six times a week on Mondays, Tuesdays, Wednesdays, Thursdays, Fridays and Sundays.

Additional flights will be operated by 33-seater SAAB 340 aircraft having one service class on board. Light meal including sandwich and a drink is served. All flights with SAAB 340 are operated by Estonian Air Regional, a 100% owned subsidiary of Estonian Air.

The late evening flights will be reintroduced and Thursday flights are added with departure from Tallinn at 21:50, which increases the frequency of late evening flights to four times a week on Mondays, Wednesdays, Thursdays and Fridays.

Stockholm is one of the most important hubs offering convenient and a big variety of transit connections to Europe, Northern America and Asia both for leisure and business travellers.

For tickets and more information please visit www.estonian-air.com, contact Estonian Air Call Centre +372 6401 163 or contact your travel agency.