"During the second quarter of 2020, the Baltic economies, like the rest of the world, were hit by the corona crisis. In the housing markets of the Baltic capitals, it was the secondary market that bore the brunt of pandemic damage. There was a drop in the number of transactions in the secondary market, resulting in new apartments gaining a bigger market share. In Tallinn and Vilnius, this change was significant enough to skew average prices upwards and make housing less affordable. Thus, in the second quarter of 2020, the housing affordability index tells the story of a crisis-induced change in market structure due to a large but temporal drop in the number of transactions, rather than of a permanent shift in housing affordability," said Swedbank.
In Rīga "housing affordability improved slightly in the second quarter of 2020. Average apartment price growth slowed to only 1% in that period, but wage growth moderated less, resulting in improved affordability. The new-project and renovated apartments maintained a price growth of 7% on average. The older apartments became the first victims of COVID-19, as the prevailing uncertainty resulted in a drop in prices and the number of transactions in the secondary market," Swedbank said.
The crisis has "supercharged" the prevailing trend of shifting from older to newer apartments, though "as the recovery in the secondary market takes hold, the housing market will normalise," the bank predicted.
The full analysis is available to read online.
