The level of demand has remained equivalent to the level of 2019. Borrowing habits are dominated by rational caution – banks stick to responsible lending principles, but people are more careful and assess the impact of the housing purchase on the budget, and look at functional housing without excess areas.
“Precautions and concerns seem to be the main characteristics of 2020. However, despite the economic turbulence caused by the pandemic, the population's interest in purchasing housing remained quite high,” said Ainārs Balcers, Head of Mortgage Support Department, Baltic Banking Competence Center Private of Swedbank. Demand fell in Q2 2020, but demand for home loans increased again in Q3.
Although the situation was unclear due to the pandemic, around €575 million has been issued in housing loans during the first ten months of 2020.
“Judging from the interest of the population, the overall result is likely to be comparable to the amount of 2019 lending, when a total of around €650 million was issued, and in 2018 it was €520 million,” Balcers said.
Average credit amounts also remain similar in 2020 as in 2019, slightly over €62 thousand per contract. Actual demand is high, but only half of it is realized in deals. But what are the most significant obstacles to getting a housing loan?
“Still poor credit history, insufficient savings levels or low incomes are the main reasons why there are people who still cannot receive mortgage loan. It is true that the shadow economy also reduces the availability for part of society, because without transparent and documentable income, it will not be possible to obtain loans,” Balcers said.
The trend in recent years, which has only been accelerated by the state of emergency, has made it clear that in many professions, jobs can also be carried out remotely. This in turn stimulates interest in a kind of personal office in housing in a quieter suburban district or in a rural house,” Balcers says.
While looking at demand trends, the real estate developer Bonava Latvija representative Kaspars Ekša said that this year, despite the influence of Covid-19, demand for housing is high and 2020 has been successful in terms of business volumes, and the market revived at the end of the summer after the spring downturn.
People more appreciate the functionality of the apartment and are not looking for extra space.
“People prefer to buy a smaller three-room apartment than a large two-room apartment. As a result of the pandemic, people spent more and more time at home and looked for an additional place to work, where children could study, and this further increased the need for functionality,” explained Ekša.
More than half of the housing purchase or construction borrowers use the guarantee offered by state development financial institution “Altum” for the bank loan.
Andris Veismanis, Head of Altum Private Guarantees, says that the amount and number of guarantees granted in 2020 are almost identical to 2019 figures. Over the five years since the program has been operational, more than 18 thousand guarantees have been granted, with a total amount of guarantees of more than €135 million.
The funding for the housing guarantee program has so far been sufficient and will be supplemented if necessary.