RIGA, May 20 (LETA) - In the first quarter of 2025, housing affordability improved in all three Baltic capital cities, representatives of Swedbank told LETA, citing the latest Baltic Housing Affordability Index.

In the first quarter of this year, a household earning one and a half times the average net monthly salary could afford an apartment of about 65 square metes in Tallinn and an an apartment of 63 square meters in Vilnius with a mortgage loan. By contrast, housing affordability remained significantly higher in Riga. An average household in Riga could afford to buy a 100 square meters large apartment by paying a mortgage of up to 30 percent of the family income. In the primary market, the average household could afford to buy an apartment of around 55 square meters.

At the same time, Swedbank data show that the average size of an apartment in Riga purchased with a mortgage loan is around 55-60 square meters large. According to the bank's economist Oskars Niks Malnieks, this means that after two long years, the average household can once again afford an apartment in a new building. Compared to the first quarter of last year, the affordability of housing on the primary market has increased significantly - the average household can afford to buy an apartment about 12 square meters larger than last year.

Malnieks noted that the record high activity in the fourth quarter of last year was not just a passing surge. In the first quarter of this year, the highest activity has consistently been seen in the secondary market. However, the primary market is also finally showing a sharp pick-up. Several large projects coming up for sale has resulted in a sharp increase in activity compared to last year. Bookings also increased, but the stock of unsold apartments remained high.

The average price of apartments in Riga continued to rise, reaching the highest level in recent years. The price hikes have been recorded in all segments, including the largest segment in Riga - non-renovated Soviet-era standard-design apartments in residential districts. In the primary market, slight discounts were observed in less sought-after projects or apartments. According to Malnieks, apartment prices are expected to continue to rise.

One of the factors that will contribute to price increases in the medium and long term is the European Union (EU) directive adopted in 2024, which stipulates an energy efficiency standard for all new buildings. All housing stock in Latvia will have to meet such standards by 2050. This means that over the next 25 years, housing will have to be actively renovated, leading to a gradual rise in the average market price.