Analytics, Banks, Estonia, Latvia, Lithuania, Real Estate

The bank’s representatives said that in the second quarter of 2018 the value of the HAI in Riga was 184.8 points, which means that the monthly income of a family whose income is equal to 1.5 of average net wages (1,245 euros) and that wants to buy an average-sized apartment of 55 square meters is 84.8% higher than needed to spend up to 30% of the family’s income on mortgage costs.

Over the past year, the HAI has risen in Riga on a steep growth of net wages (9%) which compensated for a rise in apartment prices and a small rise in interest rates on mortgage loans

In Tallinn, the HAI dropped 3.1 points on year to 156.3 points in the second quarter of 2018. Housing affordability in the Estonian capital deteriorated because the rise of net wages could not compendate for climbing apartment prices and interest rates.

In Vilnius, meanwhile, the HAI rose 2.3 points over the past year to 131.7 points thanks to the steep wage growth, which was stronger than the rising apartment prices and interest rates.

According to Swedbank’s data, in the first quarter of 2018, the time an average family in Riga needed to save for a 15% down payment was less than two years and decreased by one month year-on-year to 23.1 months. The saving time was longer for families that were paying rent as well. For families with children and young professionals buying their first homes in the government-funded mortgage guarantee program the saving time was considerably shorter as their down payments were smaller.

In Tallinn, the saving time for a down payment remained unchanged at 27.5 months in the second quarter of 2018, and in Vilnius the saving time decreased by two months to 34.3 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.