Housing accessibility has improved in Riga rather capably in Q1 2016. It also remains the highest among Baltic capitals. Accessibility has benefited from wage rise and decline of average apartment prices in comparison with the same period of last year. Accessibility has improved in Tallinn as well, which came mainly due to rapid pay rise. Housing accessibility in Vilnius has improved only slightly – although wage rise has been strong, accessibility has been impacted by equal apartment price rise.
In Q1 2016, housing accessibility index in Riga managed to reach its highest value since 2005 – 166.5, which is also a 15.1 point improvement over the result of the year before. Index value of 166.5 means income of standard households (whose income is equal to 1.5 times of the average wage in Riga and those wishing to buy a 55 m2 large apartment) was 66.5% larger than necessary to afford diversion of 30% of income to maintain a mortgage loan. Accessibility was further improved by a confident wage rise of 5.2% and drop of average apartment prices by 4.6%. It is worth mentioning that the price rise was not witnessed in all segments. Prices in the standard-type apartments continue growing rapidly – by 7.8% (4% on average last year). Housing loan interest rates have increased slightly – by two base points in comparison with Q1 2015.
«Although housing accessibility continues to improve, residents’ overall activity on the market stagnates. In addition, activity remains weak in spite of the increase of the number of transactions as part of the state support programme for families with children. Approximately 15% of the deals are those carried out as part of the support programme (7-8% in 2015). It seems this increase is partially related to the reduction of the state fee for registration of ownership rights in the Land Book from 2% to 0.5% of property value. At the same time, however, there is a lack of clarity in relation to the continuation of the programme, which creates risks for future quarters,» – says Swedbank economist Andrejs Semjonovs.
Tallinns’ housing accessibility index improved to reach 153.7 in Q1 2015 (143.6 in 2015). Index improvements can be explained with a significant net wage growth of 8.5%. Apartment price rise has become slower. Compared with the same period of 2015, prices have increased by 0.7%. Housing loan interest rates have grown by five base points.
Compared with Q1 2015, housing accessibility in Vilnius has only grown by 0.5 points to 132.3. The small improvement was improved by rapid net wage rise of 7.1%. Nevertheless, it was delayed by a nearly equal apartment price rise – 6.8%. Housing loan interest rates have declined by one base point.
The period of time required for households in Riga to save up enough money for the first instalment form mortgage loans decreased to 2.4 months, down to 23.5 months. The period of time required for first instalment of housing loans with limited client responsibility is significantly larger. The period of time can be even longer if the household also has to pay for rent.
In Riga, an average household had to divert EUR 186 a month to service a mortgage loan (EUR 294 in Tallinn and EUR 224 in Vilnius), as reported by Swedbank.