In Q3 Riga was the only Baltic capital where housing affordability had improved in comparison with the same period of 2015. Growth of average net wages and decline of interest rates contributed to the improvement of housing affordability. Affordability in Tallinn has become somewhat worse under influence from higher interest rates. Housing affordability in Vilnius has been declining for the second consecutive quarter.
Housing affordability index in Riga has improved again over the course of the year. HAI has reached 162.5, up by 2.3 points YoY. Index value of 162.5 means income of standard household (whose income is equal to 1.5 of average net wage in Riga and which hopes to buy a 55 square meters apartment) was 62.5% larger than necessary to divert 30% of income to service mortgage loan.
The improvement came thanks to interest rate decline by 15 base points and the growth of net wages by 1.7%. Average transaction price per 1 square meter grew by 2.2%. Housing price increase was noted in all apartment segments.
According to Swedbank economist Linda Vildava, housing affordability continued to improve in Q3. This is reflected in a slight activity and price increase. The housing market is viewed as stable. Supply and demand are balanced in the economic class segment. Development of the tendency of reserving apartments before they are finished means there is a lack of apartments of appropriate price and quality. Demand has the potential to grow – residents’ income grows, as do savings. Interest rates remain low.
Compared with the same period of 2015, HAI in Tallinn has declined by 0.8 points, reaching 145.9. The decline was affected by a slight, four-point rise in housing loan interest rates. Average apartment price grew hand in hand with average net wages – both indexes grew by 7.8% annually.
HAI in Vilnius declined by 6.4 points in Q3, reaching a value of 124.3. The decline was mainly dictated by average apartment price per 1 square meter rise by 12.8%. Average net wage growth reached 7.8% and loan interest rate grew by four base points.
The amount of time necessary for a household in Riga to gather enough money to afford the first installment has declined by 0.1 month, reaching 25 months. The amount of time necessary to save up enough money to afford first installment housing loan with limited client liability is significantly larger, considering how much money is necessary. More time is necessary also because households have to pay rent at the same time. The amount of time necessary in Tallinn remained unchanged (29.7 months), whereas the amount of time in Vilnius has grown by 1.7 months (38.1 months). (BNN/Business World Magazine)
