Housing Affordability Index for Batics, Q2 2012
The housing affordability index (HAI) increased to 164.5 in Tallinn, 109.8 in Vilnius, and 138.3 in Riga
- During the second quarter of 2012, housing affordability strengthened the most in Tallinn: the housing affordability index (HAI) – which is calculated for a family whose income is equal to 1.5 of average net wages with an average-sized apartment of 55 square meters – increased from 155.3 in the first quarter this year to 164.5. Over the same period, the HAI in Vilnius and Riga increased less - from 104.9 to 109.8, and from 136.5 to 138.3, respectively. This means that in the second quarter household wages in Tallinn were 64.5% — and in Vilnius, 9.8%, and in Riga, 38.3% — higher than needed to afford an apartment, according to our norm of 30% of net wages for mortgage costs.
- In Tallinn, the HAI increased mostly because of a 4.9% quarterly increase in net wages. Affordability was boosted significantly by a 30-basis-point decrease in interest rates as well. A larger increase in affordability was held back by rising apartment prices.
In Riga, the main reason for the sluggish quarterly increase of housing affordability was quite rapid (5.0%) increase in apartment prices. However, it was outweighed by faster decrease in interest rates and wage growth.
- In Vilnius, the affordability increase was fuelled mostly by a decrease in interest rates of 25 basis points on a quarterly basis. Increasing wages and decreasing apartment prices also lifted affordability, but to a smaller extent.
- The time needed to save for a down payment decreased by approximately two weeks in Tallinn and Vilnius, to 24.8 and 36.5 months, respectively, but increased by the same amount to 27.3 months in Riga.