Housing affordability improved in all Baltic capitals.- ECB interest rate cuts now are less than a month away.
Housing affordability continued increasing in Riga and Vilnius, and it started to increase in Tallinn as well, leaving behind the lowest point in affordability in 2023. Nevertheless, there is a long road of recovery ahead. Most notably – affordability in the primary market is still particularly low, leaving this segment to high earners.
Market activity remained subdued at rather low levels in Tallinn and Vilnius, whereas it continued to decline in Riga. Consumer confidence in the first quarter kept on growing and was very strong in Lithuania, while it inched closer to its long-term average in Latvia. In Estonia, although household confidence showed some signs of improvement in April, it remains very weak.
More good news is that in less than a month the European Central Bank (ECB) is expected to start lowering its interest rates. While the rate cuts will be gradual (four cuts this year at 25 basis points each), this should still boost buyer confidence. The sustained wage growth and declining interest rates will speed up the recovery of housing affordability in the coming quarters.
