Despite the fact that inflation is currently low across Europe and wages are rising, the housing market is still slowly recovering. In the new projects, the prices are high and the residents cannot afford it, while the banks are reluctant to lend to serial apartments. The 360TV news program “Ziņneši” tells more about the situation in the housing market.
Latvia’s economy is stagnating, and the still high interest rates also slow down the development of the housing market. In the first-time market, that is, in new projects, the demand is low, while in serial apartments, the demand is higher. To a large extent, this is related to the income of the population, as well as the high property prices.
If you look at Swedbankwhich is also the largest creditor of private individuals in Latvia, this year this bank has issued loans for housing in almost the entire territory of Latvia, with the exception of the Krāslava region, with Riga and Pierīga standing at the forefront, of course.
The most popular way to buy a home is a mortgage loan. And the issuance of these loans could increase next year because people’s purchasing power will also increase, taking into account the reduction in labor taxes. Also good news is the drop in Euribor and the interest rate of the European Central Bank. But isn’t it the case that the banks will want to offset their solidarity tax?
“Undoubtedly, we are currently looking forward to what this final version of the law will be. So, which loans will be affected by this law of solidarity, and from that we will create next year’s strategy directly on pricing,”
says Normunds Dūcis, Swedbank head of mortgage lending in the Baltics.
According to Swedbank expressed, the majority of Latvian and Baltic residents already have their first home, and this is largely due to the post-Soviet legacy, namely the expropriation of property after the collapse of the USSR. True, this circumstance did not apply to young people who are still planning to buy their first home. The situation there is much worse.
“Generation Z and maybe one generation before that, well, the current situation around the world is such that, if before we saw that the population became wealthier and wealthier with each generation, now the situation is no longer so clear-cut. Its global economic the situation is that there are limits to trade, growth is not so fast. Well, this definitely slows down the ability of that generation to afford to buy and their, perhaps, optimism about the future,” comments Liva Zorgenfreja, Swedbank chief economist in Latvia.
There is probably no economic basis for the rapid improvement in the housing market at the moment, but experts say that the worst is behind us.
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Ah, the housing market! It’s like a bad relationship: no one really knows where it’s going and everyone’s just left waiting for a sign. And here we are, despite low inflation and rising wages in Europe—sounds like a fairy tale, doesn’t it?—the housing market in Latvia is still crawling along like a snail on a sticky sidewalk. New projects have prices so high, they could be mistaken for auctioning off a Picasso. People are saying, “Just for the price of a flat in a big city, I could buy an actual flat, possibly with a view—of a brick wall!”
It’s not surprising that banks have become the ultimate wallflowers at this economic dance, hesitant to lend to eager serial apartment buyers. It’s like they’ve suddenly decided that lending is much less fun than crazy cat videos. The “Ziņneši” news program is practically yelling, “Look at us! We’re talking about housing!” But the reality is, Latvia’s economy is like the star of a soap opera—constantly stagnating.
Interest rates are high enough to make anyone shy away from a mortgage like it’s a rabid dog. In the first-time market, aka the “New Projects” market, demand is about as alive as a chocolate teapot. You have serial apartments, which—if we’re being honest—sounds like a sitcom waiting to happen. One episode in, and they realize they’ve been renting a flat with a sink that sprinkles water like a broken fountain.
If you look at Swedbank, they’re handing out housing loans almost everywhere—except in Krāslava, which seems to have been left off their map. Could it be a bank holiday there, or is it just that the residents prefer a nice camping trip over a mortgage? One thing is clear: in the capital and its outskirts, everyone wants a slice of the pie—even if the pie is mostly crumbs at this point.
Mortgages are the fancy choice for many, like opting for a gourmet burger at a pop-up while knowing full well you more often dine on instant noodles. But with talk of rising purchasing power due to tax reductions, we might actually see a little resurgence in the market next year. It’s as if banks are saying, “Sure, we’ll hand out mortgages, but have you considered a second mortgage to decorate your new home?!”
“Undoubtedly, we are currently looking forward to what this final version of the law will be,” says Normunds Dūcis from Swedbank, presumably while biting his nails over the recent tax laws and trying to price mortgages accordingly.
He’s worried about their solidarity tax hitting the mortgage decisions like a rogue wave during a calm day. Have you seen that expression on a banker’s face? It’s the ‘we love money, we also don’t want to lose it’ face.
According to experts like Liva Zorgenfreja, the situation for younger generations is worse off than being ghosted on a dating app. Generation Z is looking at the housing market and thinking, “Why not just live in my mom’s basement until the next economic miracle happens?” Unfortunately, the dream of “every generation is wealthier than the last” is starting to look more like a fairytale than reality.
The experts say we’ve perhaps seen the worst of it—like a bad haircut that eventually grows out. But who knows? One minute you’re optimistic about homeownership and the next you’re back at your childhood home arguing with your parents over your choice of college major. The economic magic eight ball says: “Outlook not so good.”
So there we have it, folks! The housing market is like a rollercoaster you didn’t ask to ride on—horrifying, slightly fun, but mostly concerning. Keep your helmets on, and let’s see if we can navigate these fluctuating prices without losing our lunch!
Watch the video for more: The only thing more entertaining than this situation will be watching a bunch of economists trying to explain it all.
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Despite low inflation and rising wages across Europe, the recovery of the housing market remains sluggish. New constructions are costly, making them unaffordable for many residents, while banks exhibit hesitance in extending loans for serial apartments. The 360TV news program “Ziņneši” delves deeper into the current challenges faced by the housing market.
Latvia’s economy is stagnating, and persistently high interest rates are hindering the housing market’s development. The demand for new projects is markedly low, contrasting with a stronger interest in serial apartments. This discrepancy is significantly influenced by the population’s income levels and soaring property prices.
If you examine Swedbank, the largest private lender in Latvia, it has issued housing loans across nearly the entire country this year, only excluding the Krāslava region. Unsurprisingly, the most active areas are Riga and its surrounding Pierīga region.
The most popular way to buy a home is a mortgage loan. Furthermore, the issuance of these loans could see a rise next year as purchasing power improves due to a reduction in labor taxes. Good news includes the decline of Euribor rates and the European Central Bank’s interest rate. Nevertheless, will banks still seek to counterbalance their solidarity tax obligations?
“Undoubtedly, we are currently looking forward to what this final version of the law will be. So, which loans will be affected by this law of solidarity, and from that we will create next year’s strategy directly on pricing,”
says Normunds Dūcis, Swedbank head of mortgage lending in the Baltics.
According to Swedbank, a majority of residents in Latvia and the Baltics already possess their first home, largely due to historical factors stemming from the post-Soviet era. However, this does not hold true for the younger population, which faces a much harsher landscape in acquiring their first property.
“Generation Z and possibly the preceding generation are experiencing a global economic environment that no longer guarantees generational wealth growth as it did before. The current situation entails trade limitations and slower growth, which undoubtedly curtails this generation’s capacity to purchase homes and dampens their optimism about the future,” comments Liva Zorgenfreja, Swedbank chief economist in Latvia.
Experts indicate there is currently no solid economic foundation for a rapid turnaround in the housing market, yet signs suggest that the worst may be behind us.
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Steps in our mortgage policies,” comments Normunds Dūcis from Swedbank. His concerns underscore the precarious balance banks must maintain between profitability and customer accessibility in a market that seems perpetually on the brink of change.
The optimism surrounding potential tax reductions signals a faint glimmer of hope for eager homebuyers. As purchasing power potentially rises, there could be a resurgence in the housing market by next year, but skepticism still lingers. Many are left wondering if the promise of a revitalized market is merely wishful thinking or a genuine possibility.
For Generation Z and younger millennials, the notion of home ownership feels increasingly distant, akin to spotting a unicorn in the wild. With soaring prices and restrictive lending practices, many young individuals grapple with the stark reality of remaining tenants far longer than intended, or even returning to their childhood homes—a scenario often joked about, but one that increasingly resonates with young adults struggling to find stability in an unpredictable economy.
As experts monitor the evolving landscape, the housing market continues to resemble a high-stakes game where the rules seem to shift daily. The precariousness of this situation underscores the vital importance of carefully weighing risks and opportunities for both buyers and banks alike.
Stay tuned as this economic drama unfolds, characterized by fluctuating trends, fluctuating interest rates, and the constant quest for a dream home amidst financial uncertainty. For more insights and a lively discussion about these dynamics, don’t miss the video coverage, where economists and industry experts dissect the challenges and prospects ahead.