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Estonian Tax Reform Fuels Housing Market with Larger Loans
A new tax reform in Estonia establishing a unified €700 monthly tax-free income has increased the net pay for average earners by about €150, directly boosting their maximum housing loan eligibility by approximately €10,000.
- —Estonia's tax reform, implemented at the start of 2026, has increased the net income for many residents, thereby enhancing their borrowing capacity for housing loans.
- —The reform established a unified tax-free income of 700 euros per month, leading to higher take-home pay even if gross salaries remain unchanged.
- —Swedbank reports that individuals with an average gross salary of approximately 2100 euros are now receiving about 150 euros more per month, increasing their maximum loan eligibility.
- —For a borrower with an average salary and no dependents, the maximum housing loan amount has risen from approximately 104,000 euros in the previous year to about 114,000 euros in the current year.
- —This increased loan availability allows potential buyers to consider properties in the 126,000 to 134,000 euro range, depending on their down payment.
- —Despite the increased borrowing potential, Swedbank advises borrowers to ensure loan repayments do not become an excessive burden and to consider future expense increases.
Recap
Estonia's tax reform is a direct fiscal injection into the real estate market, using increased net income as a lever to expand household debt capacity. While presented as a benefit to individual buyers, the policy also creates new credit opportunities for banks and risks encouraging over-leveraging among consumers. The financial sector's cautious advice highlights the underlying tension between stimulating the market and managing the potential for increased household indebtedness.