RIGA, Nov 29 (LETA) - In Latvia's regions, housing lending is hampered by low supply and income, representatives of Luminor Bank informed LETA.

According to the bank's representatives, economic issues are the main problem that makes regional housing lending difficult. Lower incomes, higher unemployment and the prevalence of the informal economy make it difficult for many people to report their official income required for a mortgage loan.

Moreover, the wage gap is quite significant across Latvia - last year, the average gross monthly wage in Riga was slightly over EUR 1,700, while in Latgale it was just under EUR 1,100. When assessing lending opportunities, banks need to ensure that borrowers are not only able to repay the loan, but also to continue a quality life, which is very difficult with such low incomes, Luminor Bank representatives explained.

Kaspars Lukacovs, Head of Retail Lending at Luminor Bank, noted that the balance of mortgage loans issued in municipalities around Riga is close to the euro area's average, while elsewhere in Latvia, in the large cities and municipalities, lending is slow and does not exceed 10 percent of the municipality's GDP.

According to Lukacovs, the housing market in the regions is currently in a rather bleak state - many properties are old and in poor condition, and there is little availability of new housing projects. The problem is also the activity of the real estate market - while in Riga the number of advertisements for housing sales corresponds to seven months of transactions, the number of advertisements for housing sales in most regions of Latvia does not exceed five months of transactions.

The Luminor representative notes that the poor state of infrastructure and the unavailability of various services, such as healthcare and educational, make regions less attractive to potential homebuyers and reduce the value of properties there. Similarly, although financing is available throughout Latvia, it has been observed that it is in the regions where people prefer transactions where they can avoid registering a mortgage, especially for real estate transactions up to EUR 30,000.

One of the most important areas for targeted and serious work is the economic development of the regions, Lukacovs believes. He said that in order to provide people across the country with equal opportunities to buy a home with a loan, it is necessary to improve employment rates and create opportunities for people to earn higher incomes, while also working systematically to promote people's financial literacy.

There is also a critical shortage of quality housing in the regions, so improving the housing stock is one of the most urgent tasks for the public administration, Lukacovs stresses. New ways must be found to incentivize developers to build new housing or renovate old properties in Latvia's regionals, for example through subsidies or tax breaks, he says.

The Latvian branch of Luminor is the fourth largest bank in Latvia by assets. A controlling stake in Luminor belongs to US investment company Blackstone.