Is buying a property in Tallinn's Old Town a good investment?

Last updated on December 29, 2023

Yes, the analysis of Tallinn's property market is included in our pack

If you've wandered through the historic streets of Tallinn's Old Town and been captivated by its medieval charm, you may have considered investing in a property here to immerse yourself in the rich history and culture of Estonia's capital.

Is it a good idea though? How is the real estate market there? Are prices going up or going down? Do people make profits on their real estate investments? What about the rental demand?

We'll answer all these questions for you! When building and updating our property pack for Estonia, our team has been researching and surveying this area. Actually, lots of customers are interested in investing there. So we thought it would be a good idea to add some information about it in our pack.

Why do property buyers like investing in Tallinn's Old Town?

Tallinn's Old Town, with its unique blend of medieval charm and modern amenities, stands out as a highly attractive location for property buyers.

This area offers a distinct experience compared to other real estate markets, not only within Tallinn but also globally.

One of the most striking features of Tallinn's Old Town is its rich historical and architectural heritage. The area is renowned for its well-preserved medieval buildings, cobblestone streets, and historic landmarks.

This setting provides a living experience that's hard to replicate in newer, more modern parts of the city or elsewhere. The charm of living in a UNESCO World Heritage site is a significant draw for many buyers.

The popularity of Tallinn's Old Town as a residential area began to rise notably after Estonia regained independence in the early 1990s and further accelerated as the country joined the European Union in 2004. These events led to increased international exposure and investment, transforming the Old Town into a highly sought-after location.

The area's appeal has been sustained by its unique blend of history, culture, and modern living, suggesting that its popularity is more than just a passing trend.

Tallinn's Old Town attracts a diverse range of people. It is particularly appealing to those who appreciate cultural and historical richness such as historians, artists, and expatriates. The area is also popular among tourists, which makes it a lucrative spot for investment properties and short-term rentals.

Additionally, it appeals to professionals who work in the city center, as it offers a unique living environment within walking distance of major business and commercial hubs.

However, living in Tallinn's Old Town also comes with certain drawbacks. The very factors that contribute to its charm such as ancient buildings and narrow streets can also pose challenges.

These include potential limitations on modern renovations due to heritage protection laws, limited parking spaces, and the hustle and bustle from tourism, especially during peak seasons.

Additionally, property prices in the Old Town are typically higher than in other areas of Tallinn, reflecting its desirability and unique characteristics.

Make a profitable investment in Tallinn

Better information leads to better decisions. Save time and money. Download our guide.

Why is Tallinn's Old Town a nice place to live?

Living in Tallinn's Old Town offers a unique blend of historical charm and modern amenities, creating an appealing lifestyle for both locals and expats.

The area is renowned for its well-preserved medieval architecture, cobblestone streets, and vibrant cultural scene, which infuses everyday life with a sense of history and character.

This backdrop provides a picturesque setting for the numerous cafes, restaurants, and artisan shops that line the streets, offering both local and international flavors.

The expat community in Tallinn is growing and diverse, largely thanks to Estonia's progressive digital policies and a burgeoning tech industry. This international presence adds to the cultural richness of the area, with various cultural events and social gatherings catering to a global audience.

The community is known for being welcoming, making it easier for newcomers to integrate and find their place in the city's social fabric.

Cost of living in Tallinn's Old Town can be higher compared to other parts of Tallinn, reflecting its desirability and central location.

However, it's worth noting that, in comparison to many other European capitals, Tallinn is relatively affordable. Housing ranges from historic apartments to modern renovations, catering to different budgets and preferences.

Safety is a significant plus in Tallinn. The Old Town is generally safe, with low crime rates, making it a secure place for families and individuals alike.

The presence of tourists and locals in the streets, even at night, contributes to a safe and lively atmosphere.

Tallinn boasts an impressive array of amenities and facilities. For educational needs, there are several schools, including the Tallinn English College and Gustav Adolf Grammar School, both known for their high educational standards.

Healthcare is also readily accessible, with facilities like the East Tallinn Central Hospital offering a range of medical services. For shopping, there are various boutique stores in the Old Town, and larger shopping centers like Viru Keskus are just a short walk or tram ride away.

The infrastructure in Tallinn, including in the Old Town, is modern and efficient. The roads are well-maintained, and utilities like electricity and water supply are reliable.

Estonia is known for its excellent digital infrastructure, with high-speed internet widely available, making it a haven for digital nomads and tech professionals.

Accessibility is another strong point for Tallinn's Old Town. It's well-connected to other parts of the city and beyond. The public transportation system in Tallinn is robust, with buses, trams, and trolleys providing convenient connections.

For international travel, Lennart Meri Tallinn Airport is easily reachable, making travel in and out of the country straightforward.

How much does it cost to buy real estate in Tallinn's Old Town?

If you need a detailed and updated analysis of the prices, rents and yields, you can get our full guide about real estate investment in Estonia.

Purchasing a property in Tallinn's Old Town offers a unique opportunity to own a piece of history, but it also comes with its own set of considerations regarding types, demand, and cost.

The residential properties available in this area primarily consist of apartments, which range from compact studios to larger, multi-bedroom units. These apartments are often located in historic buildings, adding to their charm and appeal.

Houses and luxury villas are less common in the Old Town due to its historical nature and urban density.

In terms of demand, apartments, especially those with historical features and modern amenities, are highly sought after. Their popularity is driven by the unique blend of old-world charm and contemporary living they offer, along with the appeal of living in a culturally rich and centrally located area.

These properties attract both local buyers and international investors who are drawn to the area's history, architecture, and vibrant lifestyle.

The Old Town is characterized mainly by resale properties due to its historical status and limited space for new developments.

However, some new developments do occur, usually involving the renovation and modernization of existing buildings rather than new construction. These renovated properties can command higher prices due to their updated amenities and historical significance.

Speaking of prices, the cost of properties in Tallinn's Old Town can vary widely. Prices per square meter can range significantly based on factors like the property's age, condition, size, and exact location.

Generally, you can expect higher prices per square meter in the Old Town compared to other parts of Tallinn, reflecting the area's desirability and historical value.

Over recent years, property values in Tallinn's Old Town have shown a trend of gradual increase.

This trend is influenced by the area's limited supply of properties, its appeal to both locals and international buyers, and Estonia's growing economy and reputation as a tech hub.

While specific future developments or city planning changes that might affect property values in the Old Town are not always predictable, any renovation projects or improvements in infrastructure typically boost the area's appeal and, consequently, property values.

Looking ahead, the real estate market in Tallinn's Old Town is likely to remain robust. The area's unique appeal, combined with Tallinn's overall growth and development, suggests that property values will continue to rise, albeit at a potentially variable rate depending on broader economic factors.

Specific factors indicating a potential increase in value include the ongoing interest in historic properties, limited supply of available properties in the Old Town, and the general trend of urbanization with more people wanting to live in culturally rich, centrally located areas.

Additionally, as Tallinn's reputation as a tech-friendly and economically vibrant city grows, so too does the appeal of living in its most historic and picturesque neighborhood.

Where is the best area to buy a property in Tallinn's Old Town?

When considering where to buy property in Tallinn's Old Town, it's essential to understand that this historic area offers diverse atmospheres, property types, and prices, depending on which part you're looking at.

The Old Town, a well-preserved medieval city center, is broadly divided into two sections; the Lower Town and Toompea Hill.

The Lower Town is known for its bustling streets filled with cafes, shops, and tourists. Properties here often consist of apartments in medieval buildings, where the ground floors might still house commercial establishments.

The atmosphere is lively, making it a great place for those who enjoy being in the heart of the city's activity. Prices in this area can be quite high due to the demand for living in such a historically significant and vibrant location.

Toompea Hill, on the other hand, is more serene and residential. This area is known for its stunning views over the rest of the city and the Gulf of Finland.

The properties here are often larger and more luxurious, reflecting the area's status as a historically wealthy neighborhood. The prices in Toompea can be among the highest in the Old Town due to the exclusivity and the panoramic views many properties offer.

As for up-and-coming areas within the Old Town, it’s worth keeping an eye on the regions just on the fringes of the most popular streets.

These areas might offer slightly more affordable prices while still providing the charm and convenience of Old Town living.

In terms of specific areas to look for property, the streets around Raekoja plats (Town Hall Square) are highly sought after for their central location and historic significance. Properties here are ideal for those who want to be in the middle of everything and are willing to pay a premium for that privilege.

Another area to consider is near St. Olaf’s Church, known for its blend of residential calm and proximity to key attractions.

Conversely, certain parts of the Old Town might not be as advisable for property purchase, particularly for those seeking a quieter lifestyle. Areas that are heavy with tourist traffic, like Viru Street, can be noisy and crowded, which might not be ideal for some residents.

Additionally, some of the very old buildings in these high-traffic areas might require more maintenance and renovation, which could add to the overall cost of ownership.

Ultimately, the best area to buy a property in Tallinn's Old Town depends on your personal preferences, lifestyle, and budget.

Each part of the Old Town has its unique charm and characteristics, so it’s crucial to consider what aspects are most important to you when making your decision.

Here is a summary table to help you visualize better. If you need more detailed data and information, please check our property pack for Estonia.

Area	Atmosphere	Property Types	Price Considerations
Lower Town	Lively, bustling with cafes, shops, and tourists	Apartments in medieval buildings	High due to demand and location
Toompea Hill	Serene and residential, with stunning views	Larger, luxurious apartments and houses	Among the highest in the Old Town, reflects exclusivity
Fringes of Popular Streets	Mixed, less crowded	Variety of apartments	More affordable, still close to Old Town amenities
Near Raekoja plats	Central, historic significance	Apartments in central location	Premium prices for central location
Near St. Olaf’s Church	Residential, close to attractions	Blend of residential apartments	Moderate, offers calm with proximity to key attractions
Viru Street	Noisy, crowded with tourists	Old buildings, potential for more maintenance	Varies, could be high due to maintenance costs

Don't lose money on your property in Tallinn

100% of people who have lost money in Estonia have spent less than 1 hour researching the market. We have reviewed everything there is to know. Grab our guide now.

Is there a strong rental demand in Tallinn's Old Town?

In Tallinn's Old Town, there is indeed a strong demand for rental properties, and understanding the nuances of this market can be beneficial for potential investors or landlords.

This demand is fueled by both short-term and long-term rentals, each catering to different demographics and having distinct characteristics.

The short-term rental market in the Old Town is primarily driven by tourism. Tallinn's historical significance and its status as a cultural hub make it a popular destination for tourists, who often prefer the charm and convenience of staying in the Old Town.

These visitors typically look for furnished apartments that offer a blend of historical charm and modern amenities.

Popular areas for short-term rentals include those close to major tourist attractions like Raekoja plats (Town Hall Square) and the vicinity of Toompea Hill, known for its scenic views and serene atmosphere.

On the other hand, the long-term rental market caters more to professionals, expatriates, and students.

The target demographic here includes young professionals working in Tallinn’s growing tech industry, international employees of multinational companies, and students attending local universities. These tenants often seek modern, well-maintained apartments that blend historical character with contemporary living.

They tend to prefer locations that are not only scenic but also convenient for commuting, like the areas near major business centers and educational institutions.

When it comes to property types, potential tenants in the Old Town are often attracted to properties that maintain their historical charm while offering modern conveniences. Features like high-speed internet, updated kitchens and bathrooms, and efficient heating systems are particularly desirable.

For short-term rentals, fully furnished properties with a local aesthetic appeal are often more sought after.

In terms of amenities, properties that offer added conveniences such as secure parking, proximity to public transportation, and access to local shops and restaurants are likely to have lower vacancy rates. The appeal of living in a historic area combined with the ease of modern living can significantly enhance the attractiveness of a rental property.

Regarding potential returns on investment, properties in Tallinn's Old Town can be quite lucrative, especially given the high demand.

Short-term rentals, due to their higher per-night rates, can offer significant returns, especially during peak tourist seasons.

Long-term rentals, while typically lower in rate, provide more stable, consistent income. The exact returns depend on factors such as the property's size, condition, location, and the level of demand at any given time.

Finally, in terms of properties gaining increasing demand and potentially offering better yields, renovated apartments that retain their historical features while offering modern amenities are particularly appealing.

Properties in locations that balance tourist appeal with local livability are also increasingly in demand, as they cater to both the short-term and long-term rental markets.

Keeping an eye on such properties can be a wise strategy for anyone looking to invest in the rental market of Tallinn's Old Town.

Make sure you understand the real estate market in Tallinn

Don't rush into buying the wrong property in Estonia. Sit, relax and read our guide to avoid costly mistakes and make the best investment possible.

Is it easy to buy a property as foreigner in Tallinn's Old Town?

Before we answer the question, please know that we have an article dedicated to the experience of buying real estate as a foreigner in Estonia.

Buying property in Tallinn's Old Town as a foreigner is relatively straightforward, but there are certain aspects and regulations you should be aware of to ensure a smooth transaction.

Firstly, in Estonia, there are no specific regulations or restrictions that apply uniquely to foreign buyers. This open policy makes Estonia, including Tallinn's Old Town, an attractive location for international investors.

However, it's crucial to be aware of the general rules and processes that govern property transactions in Estonia.

The purchasing process typically involves several key steps. After identifying a property, you would make an offer, and once it's accepted, a purchase contract is drafted. It's important to have this contract reviewed by a legal professional. After the contract is signed by both parties, the buyer usually pays a deposit.

The final step is the transfer of the remaining funds and the registration of the property in the buyer's name, which is done in the Estonian Land Register.

Regarding risks associated with property investment in Tallinn's Old Town, one of the primary concerns is the condition of older buildings.

Many properties in the Old Town are historic, and while they offer charm and character, they can also come with hidden maintenance issues or require extensive renovations. It's essential to conduct a thorough inspection and possibly consult with architects or builders familiar with historic structures.

A common pitfall for foreign buyers in Estonia is not being fully aware of the legal and bureaucratic processes involved in property transactions. Unique to Estonia is its digital infrastructure, which is highly advanced but can be challenging to navigate for those unfamiliar with the system.

For instance, many documents and processes are handled electronically, which is efficient but requires a good understanding of the system.

Working with a local real estate agent and a lawyer is highly advisable. A local agent can provide valuable insights into the market, help identify properties that meet your criteria, and navigate negotiations.

A lawyer, meanwhile, is crucial for ensuring that all legal aspects of the purchase are correctly handled, especially when dealing with the complexities of historical properties.

As for exit strategies for property investors in Tallinn's Old Town, the most common approaches include selling the property at a profit after a period of appreciation or renting out the property for a steady income stream.

The rental market, especially for short-term lets to tourists, can be particularly lucrative due to the high demand in the area.

However, it's important to stay informed about local regulations regarding rentals, as these can change and impact your investment strategy.