Baltic-wide real-estate price to remain at current level in the first half of 2023

Last year, the housing market experienced price volatility. While in the first half of the year prices clearly increased, later, with the rising cost of living and the decreasing purchasing power of the population, prices either stabilised or even slightly decreased. Prices have stabilised in the first months of this year and are expected to remain stable in the first half of the year. Forecasts for a longer period are influenced by various factors, such as economic indicators - inflation, wage level, gross domestic product -, decisions of the European Central Bank, as well as energy resource prices in the future.

Increased supply on the secondary market

Along with the news of increased heating costs, the number of homes for sale has increased since summer 2022. Supply was at its highest in October and November, with a slight decrease towards the end of the year in Latvia and Estonia. Compared to January and December last year, the number of listings on real estate portals grew by 80% in Latvia, 64% in Estonia, and 44% in Lithuania.
 
The average price per square metre for housing on the secondary market is the lowest in Latvia at 1,040 euros, while in Lithuania it’s 1,400 euros and in Estonia 2,500 euros.
 
“High inflation and high utility bills during the winter months probably contributed to underused housing coming to the market. To save money and cut costs, the owners decided to sell such apartments. Supply is likely to decrease again at the end of the heating season. Overall, the average number of available housing units on the market this year could remain at last year's level,” says Kaspars Lukačovs, Luminor’s Head of Retail Lending in the Baltics.

Prices of new projects to stabilise

Housing prices in new projects have remained unchanged since second half of 2022 and are expected to remain at the current level. The number of newly built housing in Latvia and Estonia is expected to decrease by around 10%, while in Lithuania it will remain at last year's level. Comparing the market for this segment of real estate between neighbouring countries, the average price per square metre of new projects in Latvia is 2,300 euros, which is well behind Lithuania with 2,900 euros and Estonia with 3,000 euros per square metre.
 
“The likelihood of a decline in new housing prices this year is unlikely. This is due to high construction costs and insufficient supply,” Lukačovs believes.