In terms of current income and property prices, residents of Riga and Vilnius can now purchase a bigger standard apartment than a year ago, with the housing purchasing power index showing the biggest growth in Vilnius over the last 12 months, growing by 3.1 square metres to 40.0 square metres, as shown by SEB Baltic banks survey.
Even though a Tallinn resident with average income was able to buy a larger apartment than his or her Southern neighbours – 53.4 square metres as recently as Q4 2012 – the situation today has changed. A resident of Riga is able to purchase an apartment with 50.3 square metres, while a resident of Tallinn is able to purchase a living space with only 44 square metres.
SEB Latvia’s social economy expert Edmunds Rudzitis says: “The availability of housing in Riga and Vilnius improved mainly due to income growth exceeding real estate price growth, while in Tallinn the real estate prices grew relatively more than real wages, thereby significantly reducing the availability of housing.”
“However, Tallinn is still ahead of the other Baltic capitals in terms of apartment availability. Considering the price of new apartments, the average home loan interest rate, and other factors, a resident with average income can buy only 22.6 square metres of new living space in Riga, 26.9 square metres in Vilnius, but 32.2 square metres in Tallinn. The reason is that the average income of Estonian residents is higher than that of our Baltic neighbours, but the real estate price does not differ significantly in new developments,” added Triin Messimas, Development Manager of Private Loans at SEB Estonia.
*The SEB home purchasing power index is the number of square metres that a resident with average income can purchase with a loan, without taking an overly high risk. The index takes into consideration four factors that influence the home loan market: property price (standard apartment in dormitory suburbs), income, inflation, and interest rate.