Analytics, Baltic, Banks, Latvia

The bank’s representatives said that in the second quarter of 2019 the value of the HAI in Riga was 182.1 points, down 4.7 points from the respective period last year. It means that the monthly income of a family whose income is equal to 1.5 of average net wages (EUR 1,334) and that wants to buy an average-sized apartment of 55 square meters is 82.1 higher than needed to spend up to 30% of the family’s income on mortgage costs.

The bank noted that in the second quarter of this year the average price of the transaction increased by 9.3 percent, but this rise was not compensated by 6.9% increase of the average net monthly wage, thus, HAI deteriorated.

In Riga, the time needed to save for a downpayment increased by two weeks from the second quarter of 2018 to 23.3 months. 

The bank reported that the total transaction count in Riga decreased on annual basis; this was mainly connected to declining transactions involving Soviet-era apartments. But the transaction count with new apartments increased in the first half of this year by more than 30%. The reason for this rapid growth of transactions involving new apartments might be due to the  procedure for purchasing and registering property. For example, part of these purchases could have  occurred a year ago, while the apartments were being built, but, the purchasing was documented and  registered only when the apartments were finished. However, the share of transactions in Riga involving  new apartments is still rising

In Tallinn, the HAI declined 4.6 points on year to 151.5 points in the second quarter of 2019. Housing affordability in the Estonian capital deteriorated because the 5.7% rise of apartment prices, while net wages climbed 3.4%.

In Vilnius, meanwhile, the HAI rose 12.3 points over the past year to 144 points thanks to the steep wage growth by 13.4%, slight rise of apartment prices by 1.1%.

In Tallinn, the saving time for a down payment increased by two weeks to 28 months in the second quarter of 2019, and in Vilnius the saving time reached slightly more than 30 months.

The housing affordability index (HAI) is calculated for a family whose income is equal to 1.5 of average net wages with an average-sized apartment of 55 square meters. The HAI is 100 when households use 30% of their net wages for mortgage costs. When the HAI is at least 100, households can afford their housing, according to the established norm. The higher the number, the greater the affordability.

Swedbank is the largest bank in Latvia by assets.