Arco Vara's 2024 Q4 Review: Signs of Market Recovery Ahead

GROUP CEO’S REVIEW OF Q4 2024

The fourth quarter of 2024 has proven to be a pivotal moment for the real estate landscape. Arco Vara continues to witness fluctuations in pricing and occupancy in both residential and commercial sectors, largely influenced by the interest rate stability and decreased Euribor. These changes are reflected in our results for the second half of the year, indicating a period of adjustment.

Market Activity and Performance

During Q4 2024, the apartment market in Estonia showed promising growth, with transaction volumes surpassing those of the same time last year. A remarkable leap was noted in December, where new development sales in Tallinn reached a record high. Arco Vara contributed significantly to this trend by selling 7 apartments in Rannakalda, which equals the third-quarter sales. Altogether, 14 apartments were sold during the latter half of the year in Rannakalda, equating to a total turnover of €4.2 million. This surge indicates a gradual pass from the previous down cycle, especially as commercial properties also noted slight increases in transactions.

Focus Areas

Our primary concentration during this quarter was the Kodulahe residential area, where we prioritized two projects: the completed Rannakalda apartments and pre-sales for Soodi 6. By the end of Q4, we managed to sell 87 out of 113 units in Rannakalda and pre-sold 10 out of 66 units for Soodi 6. The construction of the Soodi 6 stage has been postponed until the end of Q1, pending the construction permit while we continue detailed planning for the final stage of Kodulahe, Lammi 6, which will host approximately 175 apartments, expected to begin in around two years.

Future Development Projects

Looking forward, we are gearing up for another major endeavor, Arcojärve, where our team is diligently working on all design elements and value propositions while also connecting with potential customers. There has been considerable interest in this new project, and we are optimistic about receiving confirmation for detailed planning soon, aiming for construction to start in the second half of 2025.

International Ventures and Achievements

In Bulgaria, our team has achieved impressive milestones, reporting 85% readiness for the Botanica Lozen project. This brings us closer to completing the construction by the end of the first half of 2025. We have made two more bookings, leading to a total of 9 houses sold out of 16. The traction for the Botanica Lozen project is rising, and we hope to see even more interest as the houses near completion, particularly considering Bulgarian buyers’ preference for nearly finished homes.

Additionally, we celebrated success in our Kuldlehe project, where we sold 2 of the 5 boutique apartments in Merivälja, resulting in a turnover of €1.2 million.

Outlook for 2025

As we close out 2024, signs of market improvement bring a cautious optimism for the year ahead. The real estate market is predicted to maintain a stable yet cautious approach moving into 2025. Factors such as declining transaction volumes and diminishing interest rates have already begun to stimulate the market, albeit slowly. Consumer confidence, however, remains a sensitive issue, with modest economic growth expected.

The focus for the coming months includes successfully selling completed apartments in Kodulahe and Kuldlehe, with an estimated market value of around €14 million. We also aim to sell the remaining homes at Botanica Lozen, valued at approximately €8.4 million.

Key Performance Indicators

In Q4 2024, Arco Vara’s sales revenue reached €3,390 thousand, down from €17,687 thousand in Q4 2023. For the entire year, our revenue totaled €7,477 thousand—2.5 times lower than the previous year's €18,339 thousand, mainly due to the completion of the Kodulahe Rannakalda apartment building in 2023. Despite this, we reported an operating profit of €225 thousand in Q4 2024, although a net loss was recorded for the year at €624 thousand.

The path to recovery appears gradual, with a potential for market shifts in the latter half of 2025, dependent on various economic factors, particularly tax increases influencing housing supply. Nevertheless, the easing interest rates and overall stabilization of economic conditions are set to nurture a stable recovery.

Frequently Asked Questions

What were the total sales for Arco Vara in Q4 2024?

In Q4 2024, Arco Vara reported sales revenue of €3,390 thousand.

How many apartments did Arco Vara sell in Rannakalda?

Arco Vara sold 7 apartments in Rannakalda during Q4 2024, achieving a total of 14 apartments sold in the second half of the year.

What is the outlook for the real estate market in 2025?

The real estate market is expected to remain stable yet cautious with a gradual recovery anticipated towards the latter half of 2025.

What major project is Arco Vara preparing for next?

Arco Vara is preparing for the Arcojärve project, aimed to commence construction in the second half of 2025.

Who can be contacted for further information about Arco Vara?

For further inquiries, Tiina Malm, the CFO, can be contacted at +372 614 4630 or through the company's website.

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