The market for loans for residential property reflects the stabilisation of the real estate market

Mari Tamm
Economist at Eesti Pank
  • The total volume of loans and leases to companies grew by 7% over the year with support from long-term loans
  • Around the same amount as in the previous year was granted in housing loans between March and May 2016
  • Yearly growth in the volume of household deposits remained rapid at 7%

As in previous months, the loans and leases of Estonian companies and households grew relatively fast in May, at a rate of 6% over the year. Growth was driven by both the corporate and household loan portfolios. The loan and lease portfolios of banks operating in Estonia increased over the month by 130 million euros to 16.4 billion euros.

The loans and leases of companies continued to grow rapidly in May. The total volume of loans and leases increased by 7% over the year with the main support coming from long-term loans. Companies have taken an average of 220 million euros a month in new long-term loans this year, which is one quarter more than a year ago. The growth in loans has come from companies in most sectors, with industrial and real estate companies contributing the most. The large-scale issuing of long-term corporate loans could be an indication of growth in investment activity. Other economic indicators suggest the same, with imports of machinery and equipment strong, construction volumes increasing, and VAT declarations showing rising investment by VAT-registered companies.

The market for loans for residential property reflects the stabilisation of the real estate market. Transaction volumes and the average price in the real estate market have remained at about the same level as a year ago. Although 96 million euros in new housing loans were issued in May, which is around one fifth more than at the same time last year, activity was lower in March and April. Given this, the volume of loans issued this spring was about the same as that issued a year earlier. Yearly growth in housing loans has remained at 4% for almost 12 months now. The volume of other household loans continued to grow rapidly, mainly because of car leases. Other loans were up 8% over the year in May.

The average interest rates on loans remain stable. The average interest rate on housing loans has been constant at 2.2% for a while now. The average interest rate on long-term loans to companies has varied from month to month this year, but the average for the year of 2.3% is similar to that of last year.

The quality of the loan portfolios of the banks has remained good in the stable economic climate. The volume of loans overdue by more than 60 days has generally been at the same level since the final quarter of last year at an average of 190 million euros. At the end of May, 1.3% of the loan portfolio consisted of loans that were long-term overdue.

Yearly growth in corporate and household deposits slowed in April and May, but was still quite fast at 7–8%. However, the volume of corporate deposits has not particularly increased since the end of last year, partly for seasonal reasons, and it stood at 4.9 billion euros at the end of May, which is the same amount as in November last year. Household deposits have grown further meanwhile, and they stood at almost 6 billion euros at the end of May, which is 7% more than at the same time a year previously.

Financial sector statistics and the publication schedule for them are available on the Eesti Pank website.

For further information:
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