With the ECB’s rate-cutting cycle likely over, further changes in affordability will primarily depend on wage-price dynamics- Government policy changes in Estonia and Lithuania will provide an additional boost to market activity in 2026
With borrowing costs remaining flat in Tallinn and Vilnius, affordability improved only marginally in the final quarter of 2025 as wage growth only slightly outpaced apartment price increases. In Riga, however, affordability climbed higher as lending margins declined further, and wage growth exceeded apartment price increases. Overall, affordability remains highest in Riga, largely reflecting structural differences – namely the large share of Soviet-era block-type apartments.
This contrast is visible in loan sizes. An average Swedbank-issued mortgage on an apartment exceeded EUR 135,000 at the end of 2025 in Vilnius and Tallinn – nearly twice the level seen in Riga.
Primary market housing affordability remains below levels seen pre-2022 in all the Baltic states. Primary market affordability has recently shown similar improvements in Riga and Vilnius, while the affordability increase has stalled in Tallinn. The market remained comparatively active in Tallinn and Riga in the fourth quarter, while accelerating further in Vilnius. In Lithuania, the option to withdraw savings from second-pillar pension funds will support strong market momentum throughout the year. It is already pushing prices up and could lead to falling housing affordability this year. Net wage growth is expected to ease in Lithuania and Latvia, while in Estonia the personal income tax reform will provide a notable boost to net incomes this year, supporting housing affordability.
