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Sunday 15.09.2019 | Name days: Sandra, Gunvaldis, Gunvaris, Sondra

Expert: Estonia nears real estate bubble; Latvia still has a way to go

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn the past ten years, Latvia’s residents were more careful with mortgage loans than their Estonian neighbours. Currently the total volume of mortgage loans in Latvia is twice as small when compared to Estonia, as reported at Bigbank’s organized financial sector’s strategic development forum by Bigbank Latvia governor Ģirts Kurmis.

Intensive money lending in Estonia influences more rapid real estate price rice and brings new housing to the market. This also brings the domestic real estate market closer to a bubble. Latvia, on the other hand, is not at risk as the country’s economy has been stronger and in a better state lately when compared to 2008, says Krūms.

At the end of 2018 the total mortgage loan portfolio of Latvian banks reached EUR 4.08 billion, whereas in Estonia it was EUR 7.1 billion. When translated to their respectable population size, the average volume of loan commitments in Latvia per capita is EUR 2 100, whereas in Estonia it is EUR 5 300, says Kurmis.

Both countries differ from one another when it comes to the number of newly-built houses. Between 2012 and 2017 one house a year was built on average in Latvia per 1 000 residents, whereas in Estonia it was three or 2.7 new houses. In 2007, an average of 3.2 new houses were built in Latvia per 1 000 residents to well-known results, said Kurmis.

Additionally, prices tend to differ greatly between the two countries. In Riga the average price of 1 m2 in a new project house is EUR 1 400, whereas the price in Tallinn is EUR 1 800, which is the same as the price was in a new project Riga 2007. Although there are price differences, Latvia’s real estate market continues growing. Data for the first nine months of 2018 shows that the number of purchase transactions with real estate property has increased 63.1% when compared to the same period of 2017.

The expert stresses that Latvian households’ debt volume has considerably reduced in the past decade. In 2008, for every saved EUR 1 households’ debt was EUR 2.17, whereas in 2018 it was only EUR 0.74, which means Latvia’s index is considerably better than it was in 2008. This means residents have become more responsible with finances.

Looking at the situation on the real estate market it can be concluded that now is the best time to purchase real estate in Latvia. In Riga housing in a new project costs 1 400 EUR/m2, whereas in Tallinn such a price is typical for previously owned real estate property. Prices and the number of purchase transactions in Latvia remain moderate and continue growing in a balanced manner. This means Latvia is far from any real estate bubble, says Kurmis.


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