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Monday 16.07.2018 | Name days: Hermīne, Estere

Riga's state of real estate: two years for a mortgage loan payment

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe general housing availability in Riga worsened in Q1 of 2013. Although, Riga residents require the least amount of time to gather enough money to perform the first payment of a mortgage loan.

The worsening of the situation in Riga’s real estate market was due to the increase of interest rates and the drop in seasonal work wages, according to Swedbank’s Housing Affordability index (HAI).

Compared with Q4 of 2012, Riga’s HAI reduced to 151. Housing affordability was improved slightly by the 2.4% price reduction. The increase of the mortgage loan interest rate negatively impacted housing affordability, as did the drop in wages. Nevertheless, Riga’s housing affordability remains high – a household the regular income of which is equal to 1.5 of an average net wage and plans to buy a 55 m2-large apartment needs to divert 19.9% if its income for mortgage payments. This is 30% lower than the norm.

“Even though the real estate market in Riga remains largely segmented, the general activity keeps gradually increasing. Non-residents dominate the expensive apartment segment in Riga. However, the proportion of transactions on this front remains low. Meanwhile, the activity on the middle class segment (500-1000 EUR/m2) has been increasing in the most popular micro-districts lately. The activity in the cheapest segment remains largely the same”, – Swedbank economist Kristilla Skruzkalne explains.

On average Riga’s households need 25 months to gather enough money for the first payment. That of Vilnius reduced by more than one week – 34 months, and Tallinn by nearly five weeks – 26 months. In Riga, regular households had to be able to divert 168 EUR for mortgage payments in Q1 of 2013. That of Tallinn and Vilnius was 228 EUR and 198 EUR.

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