Bigbank quarterly review: number of home loan applications doubled, but pace was slower in major cities
In the first quarter of this year, the number of home loan applications grew by 95% compared to the same period last year, nearly doubling, but in Tallinn and Harjumaa this figure was only 66%, according to Bigbank's loan portfolio analysis.
Somewhat surprisingly, it was precisely in the larger centers that growth was slower – in Tallinn and Harjumaa 66%, in Tartu and Tartumaa 78%, and in Pärnu and Pärnumaa 50%, which falls significantly short of the average growth of 161% in other Estonian regions. "Likely, a year ago there was greater overall financial uncertainty especially among those living further from the larger centers, but by now considerable stability has emerged and transaction confidence is also recovering," explains Jonna Pechter, head of Bigbank Estonia.
As a second reason, Pechter points to the so-called ratio of average salary income to real estate prices, which is more favorable to home buyers in areas further from the centers. "In larger cities, a few years ago real estate prices climbed faster than wages, and so there too the recovery of purchasing power takes more time," notes Bigbank's head.
According to Bigbank Estonia's head Jonna Pechter, the number of loan applications is important because it shows people's readiness to purchase a home in a given period. "Since the growth in actual transactions has been slower than the growth in applications, it can be assumed that transaction activity will grow in the coming months, since many loan applicants' home purchase plans have not yet been fully realized," says Pechter.
Jonna Pechter mentions as an additional reason for rapidly growing home purchase interest the regulation of the President of Eesti Pank that came into force on April 1st, which established a new procedure for calculating the limit of the ratio of loan payments to income. This means, for example, that a person with a net income of 1700 euros can now take a loan of up to 141,000 euros instead of the previous 120,000 euros.
