The most notable improvement across the Baltics was in secondary market activity.- Summer heat in Vilnius, spring in Riga and a prolonged winter in Tallinn’s primary market.
Housing affordability continued to recover in all Baltic capitals in the second quarter of 2025, supported by two 25 basis point cuts by the ECB and net wage growth outpacing apartment price increases. While there is still some road ahead to full recovery in Tallinn and Vilnius, the peak is in sight for Riga. This is thanks to Riga’s largest market segment – block type apartments – which has shown exceptional improvement in affordability, now surpassing 2021 peak levels.
Market activity was notably higher than a year ago, with most activity seen in the more affordable secondary market. The primary market is also seeing strong momentum in Riga, and even more so in Vilnius, while remaining subdued in Tallinn.
Swedbank expects two more rate cuts by the ECB before the cutting cycle ends (while markets have priced in just one), leaving the main policy rate at 1.5%. As rates are approaching the bottom, going forward the recovery in housing affordability is expected to be mainly driven by apartment price and net wage dynamics. Withdrawals from the second pension pillar, starting in 2026, along with a planned reduction in a required down payment in Lithuania, will give an additional push to market activity.
