SEB home purchasing power index: A resident of Tallinn can buy an apartment 10 square metres smaller than a resident of Riga

SEB PankAccording to the SEB home purchasing power index, in the first quarter of the year a person living in Tallinn and earning an average income was able to purchase 42.4 square metres of new living space in a dormitory district, while a resident of Vilnius could purchase 42 square metres. In the Baltic States, secondary market apartments are the most affordable in Riga, where a resident could buy a standard apartment of 52 square metres without taking excessive risks and loan obligations.

When compared to Q1 2015, the purchasing power index of apartments in dormitory districts declined by 0.8 square metres in 12 months. At the same time, a resident of Riga earning an average income was able to afford a standard apartment which is 0.9 square metres larger, without taking excessive risks and loan obligations. The biggest increase occurred in Vilnius, where the accessibility of secondary market apartments improved by 1.1 square metres.

“While real wages grew the fastest in Estonia during the year, compared to our neighbours to the south, then in Latvia and Lithuania the increase in real estate prices was more modest. The accessibility of apartments was also somewhat improved by the slight decrease in the average home loan interest rate in Lithuania when compared to the first quarter of last year”, commented Tõnu Sepp, Director of the Retail Banking Division.

*The SEB home purchasing power index indicates, in square metres, the size of a flat that a resident with average income is able to purchase using a loan without taking an overly high risk (with a loan expiry date of 25 years, down payment of 20 per cent, and loan payment does not exceed 30 per cent of the borrower’s income). The index takes into consideration four factors that influence the home loan market: property price (average standard apartment in dormitory suburbs), income, inflation, and the interest rate.

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