Expert: Even One Percentage Point Would Revive Home Purchases, the Key Is in Banks' Hands
When discussing solutions to reverse the apartment market downturn, most focus on the possibility of price drops, yet banks could take an important step to add investment confidence and make home purchases more accessible again, believes Martin Vahter, head of 1Partner Real Estate.
The combined cost of bank margin and Euribor for the borrower today is around 6%, of which nearly 2% is the bank's margin portion. "For a home buyer, the price of money has increased roughly three times in a short period. During the previous downturn, banks were willing to lower their margin compared to today by as much as four times, down to 0.5%, but over the past year, no one has taken such a serious step," says Martin Vahter, noting that Luminor's currently offered 3-year fixed rate of 4.99% is the closest offer, but even that period is still limited.
"If someone takes out a 100,000 euro loan for 25 years to buy an apartment, at a 6% interest rate they pay approximately 60 euros more per month than at 5%. For an average Estonian family, this is quite a significant difference today," Martin Vahter illustrates with a real-life example and notes that together with the discounts already offered by developers, new apartments on the market could certainly gain momentum this way. "A more active market in turn means more transactions, and in the end, banks themselves would also benefit from such a one-fifth reduction in the price of money," Martin Vahter reasons.
1Partner is the leading real estate group in the Baltic region, with offices in Tallinn, Tartu, Riga, and Vilnius. 1Partner group provides real estate brokerage, valuation, construction, development, management, and investment management services. 1Partner real estate group is the official cooperation partner of JLL (Jones Lang LaSalle), the world's largest commercial real estate advisory company, in the Baltics.
