The activity in the housing loan market cooled a little in June

Autori Raido Kraavik pilt

Raido Kraavik

Eesti Panga ökonomist



The real estate market stood out for its level of activity in the first half of this year. Strong demand for housing loans continued in June, but slightly fewer loans were issued than in the record months from March to May. The hot summer weather may have calmed transaction activity to some extent, but it is still too early to draw conclusions about the further development of the market. The danger of overheating remains in the real estate market and it may be heightened by the payouts in September from the second pillar pension money to those who applied for it at the start of the year.

An average of 171 million euros a month of new loan contracts for purchasing housing were signed in the second quarter of the year. This is 13% more than the first quarter and over 40% more than in the second quarter of 2019 before the pandemic. The increased interest in purchases can partly be explained by transactions being postponed because of uncertainty at the start of the Covid-19 pandemic and later completed. Many people have saved more than usual over the past year, allowing them to purchase real estate. Equally the increased time spent at home because of the restrictions may have encouraged an appetite for people to improve their living conditions.

People have also been encouraged to take housing loans by the interest rate on housing loans becoming more favourable. The rate was around 2.3-2.4% for several years, but was pushed down by competition between the banks to 2.1% in March. Since then the average interest rate has stabilised.

The large demand for loans has accelerated yearly growth in the housing portfolio of the banks to 8%, which is above the average in the European Union. Housing markets are even more active in some countries than that in Estonia, which could indicate an overall rise in risk.

Some risks can also be seen in the rise in prices for residential real estate, which has accelerated in recent months in Estonia. Prices have risen for new apartments and for older ones in the secondary market. Some uncertainty has been caused by the rise in prices of construction materials, which pushed the construction price index 5.2% higher in the second quarter than in the previous quarter in the data from Statistics Estonia.

Eesti Pank published the statistics for credit institutions and lease companies for June on its website today. The statistical release describes the main changes in the statistics on credit institutions and leasing companies, covering the volume and structure of assets, loans and leases issued, deposits, and interest rates on loans and leases. The statistical release is independent of economic policy releases and is presented separately from them. 

Additional information:
Hanna Jürgenson
Eesti Pank
Communications Specialist
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