We present to your attention an article about how the reduction in the Euribor rate has affected the Latvian real estate market. We assess this positively and observe an increase in demand from buyers.
1. Over the past six months, the housing market in Latvia has undergone significant changes, making real estate purchases more accessible to a wide audience. The decline in the Euribor rate from a peak of 4.1% last autumn to 2.7% this autumn has noticeably eased the financial burden on borrowers and helped overcome the psychological barrier that previously deterred many from making a home purchase decision.
2. Euribor decline - interest payments have become less than the principal loan amount
The Euribor rate has declined by 1% over six months, reflecting a decrease in inflation and economic stabilization. This decline has led to a significant reduction in monthly mortgage payments. If previously interest payments made up the bulk of payments, now interest payments have become less than the principal loan amount.
For example, a monthly payment on a €150,000 mortgage has decreased by €100 compared to six months ago. This change strengthens buyers' confidence in the long-term value of investments, motivating them to make home purchase decisions now.
3. Young families are more inclined to purchase than before.
Positive market changes have been particularly favorable for young families' decisions, who have become more frequent in moving to larger or more modern apartments. There is also a growing interest from people of pre-retirement age who are selling large houses or apartments and choosing compact and energy-efficient housing.
4. Shortage of ready-made housing
Market changes have contributed to increased demand for finished apartments. For example, projects like "Dreilingas mājas" and Ropažu iela 16 (developer Bonava) are almost completely sold out. Quality housing in the finished and new housing segment sells very quickly, forcing buyers to make decisions faster than before.
5. Forecast: further Euribor decline
Analysts assume that the Euribor rate may decline further by 0.5% over the next six months, stabilizing around 2%. This will lead to additional reductions in loan payments. However, these forecasts depend on the economic situation in Europe.
6. Favorable conditions for buyers and developers
Stable construction costs combined with declining interest rates create favorable conditions for both buyers and developers. However, construction of the major infrastructure project "Rail Baltica" may increase demand for materials and labor, leading to an increase in new housing prices.
Conclusions:
• Currently, the Latvian real estate market is experiencing a favorable situation: low interest rates, stable construction costs, and affordable prices.
• However, future changes related to economic situation shifts and major infrastructure projects may significantly impact the market (i.e., prices will rise, especially in the new construction segment), making the current moment an appropriate time to purchase real estate.
Source: https://www.db.lv/zinas/majoklu-pieejamibu-uzlabotu-pvn-likmes-samazinasana-energoefektivajiem-majokliem-518807
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