Since the middle of last year, apartment prices in new projects have increased by about 20–30%, while in other apartment segments the price growth has been more moderate – about 10%, according to Luminor banka’s expert observations.
The situation can be explained by the increase of the construction prices and limited offer of new projects, while there is a wider choice in the supply of serial apartments.
«The high demand for new and energy – efficient housing together with the limited supply has contributed to the rapid rise in prices,» says Luminor banka mortgage loan expert.
«Due to inflation and incrase in prices, Latvian residents are planning their budgets more by trying to reduce utility expenses in the long term, thus the interest of residents in renovated serial apartments could increase in the future,» predicts the expert.
AS THE EXPERT POINTS OUT, RENOVATED STANDARD APARTMENTS CAN SERVE AS AN ALTERNATIVE FOR CLIENTS WHO MAY HAVE ORIGINALLY PLANNED TO BUY A HOME IN A NEW PROJECT, BUT DUE TO PRICE increase CAN NO LONGER AFFORD IT.
Accordingly, the amount of the mortgage loan has also been impacted by the increase of prices. Within a year it has increased by an average of €10 thousand over the year, from €75 thousand to €85 thousand.
Prognosis show that the housing rental market will be affected by the spread of Covid-19. Currently, due to the lifting of the Covid-19 restrictions, tourism has significantly increased, which in turn promotes the short-term rental of apartments.
«The development of the pandemic will determine what happens to these apartments further. In the fall students usually are in a need for the rental apartments, but if the studies are remote then demand will decrease,» the expert forecasts.
This year, the rental market has also been affected by the demand of Ukrainian refugees, who have settled mainly in Riga or larger cities and are renting their homes.
According to Luminor banka, demand for loan continues to remain at a high level, practically not being affected by rising inflation and the war in Ukraine.
AS THE EXPERT POINTS OUT, WHEN DECIDING TO BUY A HOME, a person SHOULD TAKE INTO ACCOUNT THAT THE MONTHLY LOAN PAYMENT MAY INCREASE IN THE FUTURE DUE TO THE RISE IN THE EURIBOR RATE.
«This means that client will have to expect to pay more than before, so they need to carefully assess their ability to commit and meet their monthly payments in the long term,» emphasizes the expert.
He predicts that property prices will continue to increase moderately, but that price growth could stall in some segments.