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Swedbank: housing accessibility remains high in all Baltic capitals

Housing Accessibility Index improved in all three Baltic capitals in Q3 2017. Housing accessibility in Riga benefited from wage rise and reduced loan interest rates. In spite of the improved accessibility index in Riga, the market is ruled by relative silence, according to Swedbank Baltic Housing Accessibility Index.

In Q3, Housing Accessibility Index in Riga was 177.2. Experts explain that this value means that households whose income fits 1.5 of the average net monthly wage in Riga (EUR 1,133) and who want to purchase an apartment with the size of 55 m2 earned 77.2% more money than necessary in Q3 2017 to divert 30% of the family’s income for mortgage payments.

Average apartment price per m2 grew more rapidly than net wages (8.3% and 6.3%, respectively). However, thanks to reduced mortgage rates (by 36 points) Housing Availability Index improved by 4.7 points. Although accessibility improved, apartment prices grew more rapidly than wages, forcing residents to spend more time saving up money for the first instalment.

«Latvia’s economy grew rapidly in the first three quarters of 2017. Nevertheless, the housing market remains ruled by relative silence – overall activity remained on last year’s level. With growth becoming faster and the labour market heating up economic trends end up updated with a delay. Time has to pass before residents become more confident about the situation and consider purchasing a home. Looking at offers, even though construction output has grown 19% in the past nine months, the apartment homes segment has experienced a 9% decline,» as noted by Swedbank junior economist Linda Vildava.

Continuing, she adds: «The number of issued construction permits shows that the future market will expand with a large number of apartments – the number of permits has grown by 70% in the three quarters of 2017. We expect the housing market to start developing more quickly next year.»

It should be noted that Housing Accessibility Index in Tallinn was 159.9 in Q3, which was 2.9 points below last year’s index. The index in Vilnius had improved by 0.5 points, reaching 124.8 points in Q3. It was dictated by a strong wage rise, which balanced the increase of housing prices and mortgage loan rate.

Q3 2017 was a period during which standard households in Riga needed 24.1 months to gather enough money for the first instalment.

The amount of time needed to gather enough money was longer for households that also have to pay rent. The amount of time is shorter for families with children who use loan offers with state guarantees. In Tallinn and Vilnius the amount of time needed to gather 15% for the first instalment is around 29 and 37.2 months respectively.


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