TALLINN — Since the economic crisis burst Estonia’s real estate bubble and squelched demand for new development, construction costs have slide a full 50 percent from 2007 prices.

The drop in demand has decreased labor costs because of over-construction during the boom and a huge amount of layoffs and bankruptcies in the construction industry as the market corrected its over-exuberance and depressed building material costs.

Kristjan Lepik, publisher of the Estonian financial news website tarkinvestor.ee said he doesn’t expect the prices to rebound to 2007 levels was anytime soon.

“It could be said that the prices climbed too high in the boom time, and I don’t believe that the expenses will reach that level in five years,” Lepik told Baltic Reports. “The prices will remain the same in 2010 as the rivalry between real estate developers is still too tight.”

Toomas Luuman, chairman of Nordecon International is also not optimistic, saying that in 2010 the situation will not improve much as there are not any new developers entering the market in 2010.

“Exactly when the situation in real estate market will stabilize depends on many factors such as euro adoption, how long it take to sell the properties currently on the market, and it also depends on other economic sectors,” Luuman told Baltic Reports. “Real estate will probably lag after the other sectors, not run ahead.”

Labor costs were pushed down largely by a major job cut in the building sector — 26,000 jobs were cut during the first two quarters in 2009, which is 32.1 percent compared to same period in 2008. Meanwhile the recovery of building activity is being held back by a significant unsold real estate stock.