2015. gada 20. oktobrī norisinājās konference “Starptautiskās investīcijas nekustamajā īpašumā Latvijā 2015”. Tajā ar prezentāciju "Obstacles to finance future demand for residential real estate" piedalījās arī Latvijas Bankas ekonomiste Olga Lielkalne.

1. OBSTACLES TO FINANCE FUTURE DEMAND
FOR RESIDENTIAL REAL ESTATE
Olga Lielkalne
20 October, 2015

2. Creditless recovery may pose risks to investment and
medium- to long-term growth
Source: ECB, Lietuvos bankas
Mortgage lending, annual changes (%)

3. Unstable legal environment and still high credit risk
(incl. bad credit history) are considered to be the most
important supply side obstacles to household lending
Scale from 0 to 5 (0 – insignificant, 5 – very important)
Source: Latvijas Banka’s survey of seven largest credit institutions, August 2015
Banks’ view: main supply side obstacles to household lending
0 1 2 3 4 5
Bank access to financing
Strategic goals of banks
International bank regulation requirements
Quality of the existing loan portfolio
Expectations regarding general economic activity
Shortcomings of the legal framework
incl.: bad credit history of borrowers
High credit risk of potential borrowers
Domestic legislative initiatives

4. Insufficient earnings and savings, as well as inability to
prove an official source of income reduce demand for
household loans
Banks’ view: main demand side obstacles to household lending
Scale from 0 to 5 (0 – insignificant, 5 – very important)
Source: Latvijas Banka’s survey of seven largest credit institutions
0 1 2 3 4 5
More active use of alternative financial resources
Interest rates on loans
Aversion to borrowing
incl.: insufficient funds for down payment
incl.: insufficient income
Terms and conditions for receiving loans
Unofficial economic activities of borrowers

5. Creditworthiness of households and housing
affordability have improved recently…
Net average monthly wage, annual
changes (%)
Housing affordability index*
(2010=100%)
*Housing price index and net average wage index ratio; inverse relationship with housing affordability
Source: Central Statistical Bureau of Latvia
-20
-10
0
10
20
30
40
2001 2003 2005 2007 2009 2011 2013 2015
60
80
100
120
140
160
180
200
220
2001 2003 2005 2007 2009 2011 2013 2015
Total housing New housing

6. 0
5
10
15
20
25
30
<285 286-
500
451-
700
701-
1000
1001-
1400
1401-
2400
>2401
Solvent Vulnerable
…however, the level of earnings matters most
Distribution of household total monthly
net income, 2013 (%)
Vulnerable households: income and savings are less than expenses (annualized)
Source: LB survey of household borrowers (2013), EUROSTAT, Latvijas Banka
1225
EUR
Average income per month
for solvent households (2013)
5%
40000
Households with average
income of more than 1250 EUR
per month
126 000
Housing loans already issued
across all income groups

7. More than a half of potential borrowers do not want
to be indebted or do not need loans
Distribution of respondent replies about current credit liabilities
and reasons for assuming no credit liabilities (% of all replies)
Source: Latvijas Banka’s survey 2015
Have a loan
(granted by a bank
or leasing company)
30%
Cannot afford
11%
Do not need
34%
Do not want to be
indebted
17%
Other reason
8%

8. Conclusions
• Lending perspectives have improved recently, however both loan
demand and supply still remain wary.
• Unstable legal environment, its shortcomings and still high credit risk
are the main supply side constraints for lending. Bad credit history
remains a legacy from the credit boom.
• Low savings and insufficient own funds restrict demand for mortgage
loans. Many people simply do not want to be indebted.
• “Creditworthy” demand is limited, and formalizing of the shadow
economy is important for lending recovery.

9. Last but not least:
Is there a potential for rental market growth?
Distribution of population by tenure status, 2013 (% of population)
Source: EUROSTAT
0
10
20
30
40
50
60
70
80
90
100
EU28
Euroarea
Romania
Croatia
Lithuania
Bulgaria
Slovakia
Poland
Latvia
Hungary
Slovenia
Estonia
CzechR.
Malta
Greece
Italy
Cyprus
Spain
Portugal
Ireland
France
Finland
Austria
Belgium
Luxembourg
UK
Germany
Norway
Iceland
Denmark
Sweden
Netherlands
Switzerland
Tenant, rent at reduced
price or free
Tenant, rent at market
price
Owner, with mortgage or
loan
Owner, no outstanding
mortgage or housing
loan

10. Rental market has been showing a gradual
growth
Distribution of population by tenure status, 2013 (% of population)
Source: EUROSTAT
3.3 7.3 8.7 7.2 8.0 9.5 9.1 9.4
5.1 6.7 6.2 6.5 7.7 7.8 8.3 8.7
0
20
40
60
80
100
2007 2008 2009 2010 2011 2012 2013 2014
Tenant, rent at reduced price
or free
Tenant, rent at market price
Owner, with mortgageor
loan
Owner, no outstanding
mortgageor housing loan