It is hoped the Estonian property market will have a change of fortune in the future, after plans to create a mortgage bond market in the country were revealed. Bloomberg reported that the local unit of Stockholm-based Swedbank AB made the proposals to reduce borrowing costs and revive capital markets. While an official decision has yet to be made, it is expected the Estonian Banking Association will deliver its verdict imminently, which will initiate the legal steps needed to start trading bonds, Priit Perens, Swedbank chief executive officer, stated last week.

Although Mr Perens failed to estimate the potential size of the market or when bonds may be offered, the plans appear to be positive ones. They follow the break between Estonia's banks and Nordic parents, who have traditionally provided funding. This was triggered by the Lehman Brothers Holdings Inc.'s 2008 collapse, which burst the country's property bubble and shut off credit flows.

Mr Perens explained to Bloomberg: "The main reason to do this is to finance our activities more cheaply. In Sweden, there is a clear difference in prices of mortgage-backed bonds and senior unsecured bonds. It would definitely also be a suitable instrument to boost the local capital market.” What's more, Estonia is an attractive country for foreign investors, as it currently boasts a relatively low debt to private and public sectors. This makes it a prime spot for pension funds in particular.

Estonia has been performing well in other areas lately too. Data published by Statistics Estonia revealed that average wages grew by 5.9 per cent annually in Q4 2012, reaching €916 (£799.53). Real wages also increased from 1.9 per cent in the penultimate quarter to 2.1 per cent in Q4. This continues the trend for growth that has established itself over the previous six consecutive quarters. In 2013, real wage is expected to accelerate further, thanks to slowing CPI growth. Unemployment also seems to be decreasing, with the Wages and Salaries Statistics Survey showing that the number of employees at the end of December increased by 4.5 per cent year-on-year.



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