Latvia's property market saw a significant rise in activity in the first half of this year. Data compiled by Swedbank shows that the number of mortgage agreements signed rose by 48%, while the total value of loans issued grew by 60% compared with the same period last year. Activity remains highest in Riga and the surrounding region, but the regions also play a significant role – just under a third, or 29%, of all new loans were issued outside the capital.
A look at the mortgage lending figures shows that in Riga lending grew most strongly in the flats segment, where the number of agreements rose by three percentage points, while in the area around Riga there was a five percentage point increase in transactions for the purchase and construction of detached houses.
The increase was particularly pronounced in transactions involving properties built between 2000 and 2023 – in this segment the number of loans rose by 69% compared with the first half of last year. That said, the majority of all loan agreements in Latvia (61%) are still signed for properties built before 2000. Compared with its neighbours, Latvia's proportions differ – in Estonia half of all transactions involve newer homes, while in Lithuania their share exceeds 56%.
Average loan amount – 90 thousand euros
Swedbank data shows that properties are most often bought by people aged 30 to 40 whose household average monthly income exceeds 2500 euros. The average mortgage in the first half of this year was 90 thousand euros, which is 13% more than in the same period last year.
As Marika Toma, Head of Mortgage Lending at Swedbank in Latvia, points out: “The sharp rise in demand for mortgages and in the number of loans issued applies both to the large cities and to Latvia's municipalities. As in Riga, activity in other Latvian cities also remains highest in the flats segment, which accounts for 60% of new loans in the regions. The remaining 40% of loans were granted for the purchase and construction of detached houses, and roughly a third of that volume consists of loans for building new detached houses.”
Active borrowing in Jelgava, Liepāja, Sigulda and Ogre
Looking at mortgage lending activity across Latvia's regions, the largest number of agreements were signed for properties in Jelgava (11.9%), Liepāja (10.2%), Sigulda and Sigulda municipality (8.7%), as well as Ogre and Ogre municipality (7.7%).
Some 67% of borrowers in the regions are families with children, and the largest number of borrowers are in the 31 to 40 age group. Average monthly incomes among borrowers in the regions are comparatively lower than in Riga and the surrounding area. Where a loan is issued without a co-borrower (60% of cases), the average income is 1000 to 1500 euros, but with a co-borrower it is 2000 to 2500 euros a month. In roughly 40% of cases, borrowers make use of Altum guarantees for families with children.
“Regional cities with strong economic growth and developing business activity are becoming increasingly attractive to homebuyers as well. Property prices there are still lower than in Riga and the surrounding area, yet earnings and job opportunities are often comparable. Good infrastructure and convenient transport links with the capital add to this, allowing people to live in the regions, send their children to local schools and work in Riga at the same time, thereby reducing their cost of living,” notes Marika Toma.
She points out that in the regions people often use their own personal savings to buy flats, as indicated by the number of flat transactions with mortgages registered in the Land Register. In Ogre this year, for example, the share of flats bought with a mortgage is only 38%, in Jelgava 35% and in Liepāja 23%.
What are the average prices per square metre in the regions?
Changes in property prices reflect the supply of properties and the economic activity of a region. According to Land Register data, the average price in the flats segment this year is 930 euros per square metre in Valmiera, 828 euros per square metre in Jelgava and 827 euros per square metre in Ogre and Ogre municipality, while in Daugavpils the average price has been 300 euros per square metre.
“Mortgage volumes show that people in the regions are also keen to buy and build new properties whose cost is on a par with property prices in Riga and the surrounding area. This year, for example, a loan for property construction in Cēsis municipality reached 255 thousand euros, in Dienvidkurzeme municipality 254 thousand and in Ventspils 250 thousand, while in Jelgava, Dobele, Rēzekne and Madona the largest loan amounts range from 125 to 182 thousand euros,” notes Marika Toma.
Looking at borrowers in Latvia's regions in terms of employment, the most active borrowers in Liepāja are employees of the public and defence sector and of the construction industry; in Ogre, healthcare specialists; in Jelgava, people working in education and culture; in Valmiera, manufacturing sector employees; and in Daugavpils, those employed in the public and defence sector and in IT.