OREANDA-NEWS. July 03, 2013. According to the SEB housing purchasing power index, in the first quarter of this year the availability of housing improved in Vilnius, but decreased in Tallinn and Riga. In Vilnius, real estate is more readily available because of the decline in interest rates; in Riga, purchasing power is reduced by the rise in interest rates; in Tallinn — increase in apartment prices.

In the first quarter of 2013, a person with average income could buy himself a 47.1-square metre apartment in Riga, which is 1.3 square metres less than in the third quarter of 2012. In Vilnius, a person with average income could buy an apartment of 39.6 square metres, or 2.7 square metres larger than half a year ago. Although the housing purchasing power index in Tallinn dropped in the first quarter by 0.7 square metres when compared to last year’s third quarter, the purchasing power in the Baltic States is still the highest — a Tallinn resident with average income could buy a standard apartment of 50.2 square metres.

A Tallinn resident with average income can therefore, without taking any excessive risks or loan commitments, buy an apartment 10.6 square metres larger than a Vilnius resident and 3.1 square metres larger than a Riga resident.

Triin Messimas, Development Manager of Private Loans at SEB Estonia, explained that in Vilnius the housing purchasing power has been most influenced by an average decline in the interest rate of 0.44 percent and a real wage increase. In Riga, contrary to Vilnius, the growth of purchasing power was prevented by the increase of the average interest rate by 0.48 percent that could not be compensated neither by real wage growth nor low inflation. In Tallinn, the purchasing power was most influenced by the increase in apartment prices, although the interest rate dropped by 0.06 percent and the average real wage increased.

The SEB housing purchasing power index shows the number of apartment square metres that could be bought with average income and a loan, without taking any excessive risks (loan expiry date 25 years, down payment 20 percent, and loan payment is 30 percent of the borrower’s income). Four factors are considered to influence the home loan market: standard apartment price, average income, consumer prices, and the average interest rate of new home loans. SEB calculates the housing purchasing power index for the Baltic States semi-annually (1st and 3rd quarter), starting with the 3rd quarter of 2011.