SEB’s housing affordability index: inhabitants of Vilnius have more opportunities to acquire the residential property, however lower opportunities compared with inhabitants in other Baltic capitals
SEB’s housing affordability index estimated by SEB Banks in Lithuania, Latvia and Estonia shows that any inhabitant of Vilnius receiving an average salary may acquire a dwelling of 34.9 sq meters in an old apartment building located in a sleeping district. Anyhow, it is the smallest dwelling to be acquired, compared with opportunities of the inhabitants of other Baltic capitals. Residents of Latvia and Estonia receiving an average salary may buy a typical dwelling in an old apartment building located in a sleeping district of 43.5 sq meters and 50.5 sq meters, respectively.
Compared with the equivalent period of last year, the opportunities for buying the residential property in Vilnius and Riga increased. This year, Vilnius residents may buy an apartment larger by 3.4 sq m, and in Riga – larger by 0.8 sq m. Residents of Tallinn may buy a housing smaller by 3 sq m this year.
“Housing acquisition opportunities were changing due to average salary and dwelling price fluctuations. Interest rates on new loans were shrinking in all Baltic countries, and the greatest drop was observed in Lithuania and the lowest – in Latvia. Real wages (including not only change in salary but also price changes in consumer goods and services) grew in Tallinn and Riga but real wage in Vilnius decreased. However, irrespective of negative changes in real wage, lower interest rates and slightly lower dwelling prices, the inhabitants of Vilnius will be able to acquire the dwelling of larger area than in previous year. This year, the residents of Tallinn have fewer opportunities, irrespective of the increased wages and decreased interest rates. Current situation in the Estonian capital was determined by increased residential property prices”, – said Julita Varanauskienė, Family Finance Expert at SEB Bank.
Nevertheless the ratio of income to residential property prices remains the lower in Vilnius: anyway the real estate prices are too high for an individual with average income to buy a medium sized apartment (about 60 sq m).
“Current situation, i.e., high housing prices compared with average income, great doubts about possibilities to fulfill financial obligations in future still prevail. It makes negative impact on the real estate market. Thus, regardless of the lowest ever possible mortgage interest rates, the number of new mortgages is considerably lower, compared with the situation that existed four or three years ago; some people are unable to borrow as their income is insufficient to obtain a loan, and others as still worried about expected decrease in income”, said Family Finance Expert.
SEB’s housing affordability index was estimated taking into consideration the prices of residential property in the old apartment buildings, interest rates, income of residents and prices of consumer goods and services. The estimate showed the dwelling area that might be acquired by an inhabitant earning average salary and obtaining a bank credit under currently existing terms.