Housing affordability on the rise in Baltic capitals

Housing affordability improved in all three Baltic capitals in the third quarter of 2018, according to an index produced by Swedbank.

In Riga, housing affordability benefited "as wage growth surpassed apartment price growth," according to the Housing Affordability Index (HAI). According to the methodology used, 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 index, the greater the affordability.

"In the third quarter of 2018, annual average apartment price growth moderated in Tallinn, and slightly also in Riga, while slipping into negative territory in Vilnius," said Swedbank.

"The slight slowdown in average price growth in Riga was related to the larger share of deals with relatively cheaper apartments in the new economic project and the center’s old apartment segments," it added. 

Mortgage interest rates increased in Estonia and Lithuania while slightly decreasing in Latvia over the year. In Lithuania, interest rates increased the most while still remaining the lowest among the Baltic countries.

The full report is available online.


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