Latvians were hesitant to get mortgage in 2023

Last year, dwelling prices increased by 5% on average, and the volume of mortgages issued fell by 15%. The main reasons are the rise in Euribor base rates, inflation, and the increase in construction costs. More activity in the housing market in 2024 could be helped by a fall in the Euribor rate, Latvian Radio reported on February 5.

The number of newly issued mortgage loans decreased in all Baltic States last year, while housing in Rīga was cheaper than in neighboring countries. A new project in Tallinn cost more than EUR 3,000 per square meter last year, Lithuania EUR 2,600, and Latvia EUR 1,376.

“In Vilnius and Tallinn the new dwellings have been built much more, the houses built during the Soviet period have also been renovated more actively, which in turn has significantly increased the price of these dwellings,” Kaspars Ekša, head of sales and marketing of real estate developer Bonava Latvija, told Latvian Radio. “This supply is very much dependent on demand, market activity is higher and therefore there is a much higher supply. Because we still have more than 70% of people living in houses built during the Soviet period in Latvia, and in general, the real estate sector and development of new housing is very slow and lags behind our neighbors. Construction costs are very, very similar, and it is expected that these prices could rise in Latvia soon.”

Mortgages are most often taken by people at the age when a home is most needed, explained Normunds Dūcis, head of mortgage lending at Swedbank in Latvia.

“These are households where the age of customers is between 30 and 35, well, which makes quite a lot of sense because that's the moment when you need your own home the most,” said Dūcis. “Household income is on average around €2,500 and the average amount currently borrowed is around €84,000, up 5 percent from a year ago. So, given the increase in property market prices, this credit amount has also slightly increased.”

Normunds Dūcis also said that 30% of mortgage loans are granted for the purchase of housing in regions outside Rīga.

He added the housing market will be positively impacted this year by the impending cut in European Central Bank rates.

“For a couple of months, the Euribor rate has already slipped four percentage points, and we expect April could be the moment when the European Central Bank will also announce a cut in Euribor rates, and in the summer of 2025 the Euribor rate could even reach the 1.5% limit,” Dūcis said.

More than 1,200 apartments are currently available in new projects, alongside serial apartments in Soviet buildings. 

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