Bigbank: Estonian Home Loans Largest in the Baltics, but Latvia Shows Faster Growth
In the fourth quarter of last year, Latvia made the biggest leap compared to the same period a year earlier, with more than twice as many new contracts, while in Estonia and Lithuania the number of new contracts increased by one and a half times, according to Bigbank's comparison of home loan portfolios in the Baltic countries.
Although the number of home loan contracts in Latvia grew by 127.3% and in Estonia by 57.2% and in Lithuania by 48.8%, according to Bigbank Estonia's head Jonna Pechter, the main reason for Latvia's fastest growth lies in the market's earlier passivity. "Latvia's home loan figures have been lower than in Estonia and Lithuania for years. Although last year's growth is rapid, it will still take Latvians some time to catch up with their neighbors, both in terms of the number of contracts and especially in terms of the average loan amount," comments Bigbank's head.
Estonians are the boldest borrowers in the Baltic region and in the fourth quarter the average loan amount was 145,013 euros, which is more than twice higher than Latvians' 62,299 euros and Lithuanians' 108,928 by slightly more than a quarter. "Compared to a year ago, the average loan amount has grown by approximately one third in both Estonia and Latvia, but in Lithuania it has remained essentially at the same level," explains Pechter and adds that in Latvia's capital Riga, residential real estate prices are still noticeably lower, since the share of older secondary market apartments has been dominant in transactions for a long time. "The relatively rapid growth of the loan amount may, considering the local context, point to the growing popularity of new development homes, but in the longer term there is still considerable room for growth compared to neighbors," ponders Jonna Pechter.
According to Jonna Pechter, the residential real estate market in all three Baltic countries and home loans along with it are emerging from a downturn lasting a couple of years, and throughout this year growth can be expected everywhere. "If it otherwise seems likely that faster growth will come even from our southern neighbors, then slightly the cards may be shuffled by the VAT increase awaiting Estonia in the summer, which could accelerate the growth in the number of transactions with new apartments especially in spring," sums up Jonna Pechter.
