Swedbank: Is the housing market overheating?

SwedbankAlthough housing affordability in Estonia has improved, compared with the peak of the last real estate boom, it has stayed at the same level for the past four years.

Households’ confidence in purchasing or building a home has improved in recent years.

Households are more responsible in lending than ten years ago, and their risks are lower than in the last boom period.

Last year, prices of apartments in Estonia exceeded the peak of the 2007 real estate boom. However, compared with the peak of the last real estate boom, housing affordability in Estonia has improved. Ten years ago, the average net wage growth could not keep up with the average apartment price growth, which was more than twice as rapid as the growth of the average net wage making the purchase of real estate for consumers less affordable. Currently, the overall situation on the housing market is more favourable for homebuyers and their risks are lower than ten years ago. Households’ confidence in purchasing or building a home has improved in recent years, and we expect that demand for housing should remain high, at least in the near future.

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