The rise in property prices is currently faster than the comparable transactions registered in the Land Register, so there is a more frequent situation when the price exceeds the one set by the appraiser, “SEB Bank”.
–
–
Content will continue after the ad
Advertising
–
In the first 9 months of this year, it has allocated 134 million euros in housing loans, which is half more than a year ago, while the number of transactions has increased by 30%. The largest increase in terms of both the number of transactions and the volume of financing was in the private house segment, which the bank explains both by the insufficient supply in the apartment market and by the desire of the population to significantly improve living conditions.
Maris Opincāns, Head of the Retail Consulting Center of SEB banka, comments: registered comparisons, so it is increasingly the case that the price exceeds that set by the valuer, which means that potential buyers may have less funding available than they expect and have to reckon with a higher stake. ” As one of the solutions the bank recommends to use “Deep“support for families with children or young professionals.
According to SEB banka, the demand for financing in the private house segment has increased more noticeably this year. In 2020, about a quarter of the total funding allocated went to the purchase or construction of houses, but this year it is a third. The amount of financing in this segment has almost doubled, but the number of transactions has increased by 64%. The average loan amount this year is 13% higher than a year ago and is about 100 thousand euros.
The biggest demand is still for homes in Pieriga, where half of the allocated funding remains. The most popular are Garkalne, Ādaži, Ķekavas, Salaspils and Babīte counties. About a third of the funding is directed to the purchase or construction of houses in the capital, but the rest – elsewhere in Latvia.
Approaching the mark of 2000 euros
This year, the demand for apartments in new projects in both the primary and secondary markets has also grown significantly, which, according to Opincāns, is related to people’s desire for better and more sustainable housing.
“As demand grows, we see a tendency for buyers to pay a reservation fee in this situation before the object is put into operation. For some developers, these fees can account for up to 30% of the total transaction, although the object is planned to be handed over in a year and a half,” he said.
Along with growing demand, prices are also rising in all segments. For example, in the new projects in economy class prices have reached 2000 euros / m2 and continue to grow. For comparison – a year ago, prices per square meter averaged about 1,600 euros. On the other hand, when building a house, the growing costs of construction materials and labor must be taken into account. Currently, construction costs start from 1400 euros / m2. In addition, it is important to keep in mind that costs may increase during the construction process, so they should be considered with caution and with a possible margin for appreciation.
Longer construction
Along with the costs of building private houses, people face both material shortages, which require longer deadlines for the delivery and receipt of materials, and labor shortages. Therefore, when building a house, one must also take into account the longer construction cycle of the house and the longer term before commissioning, which has increased from 18 months to 36 months in recent years.
However, evaluating the real estate market in the Baltics as a whole, Opincāns concludes that prices per square meter in Latvia are currently the lowest in all segments.
No overheating
Despite the activity in the real estate market, in his opinion, at present there is no reason to talk about market overheating. Unlike the situation before the 2008 crisis, public attitudes towards credit obligations are now much more cautious.
Also, a number of regulations of the legislator and the regulator are currently in force, which determine the principles of responsible lending, preventing the assumption of excessive obligations. For example, there is a credit register and also a register of payments for services received, where information on borrowers’ liabilities is collected. Banks also adhere to strict conditions when granting funding, both for the total amount, which cannot exceed six years’ total income, and for monthly payments, which may not exceed 40% of monthly income.
It is also important to note that the property that is currently being purchased and serving as collateral has good liquidity – it means that it will be possible to sell it if necessary.
–
