Analytics, Banks, Financial Services, Latvia, Real Estate

In the third quarter of 2020, the most affordable dwellings could still be found in Riga, followed by Tallinn and Vilnius. 

The bank’s representatives said that in the third quarter of 2020 the value of the HAI in Riga was 180.9 points, up 4.1 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 and that wants to buy an average-sized apartment of 55 square meters is 80.9% higher than needed to spend up to 30% of the family’s income on mortgage costs.

The Latvian housing market continued to experience higher wage increase than average apartment price growth, the bank said.

In Tallinn, the HAI rose 2.8 points on year to 151.2 points in the third quarter of 2020. In Estonia, mortgage loan fee discounts by banks were significant enough to improve housing affordability, although apartment price growth slightly exceeded net wage growth.

In Vilnius, the Hai declined 0.9 points over year to 140.7 points in the third quarter of 2020. The index dip in Lithuania is still caused by the growth of apartment prices exceeding that of average household income, Swedbank said.

Swedbank representatives indicated that in the third quarter of 2020, the average home price in Riga rose by 0.8%, while in Vilnius and Tallinn the increase was 12% and 6% respectively.

They also noted that the second Covid-19 wave hit just after the resumption of activity on the housing market in September. Since the average housing price did not decrease in the first half of the year, the possibility of the price going down at the end of the year is slim, the bank said. 

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.