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Wednesday 24.05.2017 | Name days: Marlēna, Ilvija, Ziedone

Baltic residents find it harder to save up money for mortgage loans

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn Q1 2015, the SEB Housing affordability index for apartments in Riga was 1.3 m2 smaller than the quarter before then. At the same time, the index in Tallinn and Vilnius had decreased by a mere 0.3 m2. In order to gather enough money to afford a first mortgage instalment, Riga residents require 26.5 months, Tallinn residents require 25 months and Vilnius residents – 29.3 months.

SEB economic expert Edmunds Rudzitis: «The decline of the index in Latvia can be explained with more rapid climb of real estate prices than residents’ income in Riga. In addition, average interest rates for mortgage loans have increased as well. The indexes in Estonia and Lithuania were largely affected by the moderate climb of real estate prices and decline of remuneration of seasonal jobs. The decline of interest rates on loans has affected the index in a positive way. Over the course of the year, average rates of mortgage loans in Estonia and Lithuania had decreased by more than 0.3 percentage points, which was also affected by the change in EURIBOR on the market».

In spite of the reduction of the index, Riga’s housing affordability index remains higher than that of Tallinn and Vilnius – 50.8 m2 in Riga, 43.2 m2 in Tallinn and 40.9 m2 in Vilnius. In spite of the fact that the significance of serial apartments is the highest among Baltics, residents of Tallinn have the best potential to acquire housing for themselves, as they require the shortest period of time to save up money for the first mortgage instalment among Baltic capitals.

Rudzitis continues: «The first mortgage instalment is the main obstacle for people in their plans to acquire a home. In order to save up enough money to afford the first instalment to afford a one bedroom apartment with an area of 40 m2 in Tallinn, residents who have average wage have to divert 30% of their monthly income. The time it takes them to save up enough is 25 months. Residents of Riga require 26.5 months and residents of Vilnius – 29.3 months».

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