Real estate price dynamics, housing finance and related macro-prudential tools in the Baltics
Lina Bukeviciute, European Central Bank; Daniel Kosicki, European Commission
Real estate price dynamics, housing finance and related macro-prudential tools in the Baltics(526 kB)
DG ECFIN Country Focus presents analysis of recent trends in real estate price dynamics, housing finance and related macro-prudential tools in the Baltic States (Estonia, Latvia and Lithuania).
Indicators point towards the build-up of house price misalignments in the Baltic States in the years up to 2007, with various degrees of correction taking place since mid-2008. However, the price adjustment is now fading out. Deleveraging of the housing sector, which was triggered by the crisis, has recently been bottoming out in Estonia and Latvia. Lending conditions (in terms of taxation, supervisory constraints, real interest rates) remain favourable. On the back of increasing deposits, the improving liquidity puts banks in a position to re-launch loan supply. The Baltic real estate market should be closely monitored, with a focus on the potential risk that unfettered demand and credit expansion could fuel another regional housing boom–bust cycle.
(Country Focus. 2. December 2012.
Brussels. PDF. 8pp. Tab. Graph. Ann. Free.)
JEL classification: F41, E60, O57
The views expressed in the ECFIN Country Focus are those of the authors only and do not necessarily correspond to those of the Directorate-General for Economic and financial Affairs or the European Commission.