SEB’s Housing Price Indicator in Latvia is continuing up and jumped sharply to a positive 15.1 reading in July, indicating that twice as many Latvians are now forecasting rising prices compared to those who believe prices will drop in the coming year.
SEB began collecting data for its Latvian Housing Price Indicator in May 2009 and the latest reading it the highest recorded so far. During the last 12 months the indicator has increased by 66.8 points from a negative value then.
“Similar to other sentiment indexes, SEB’s Housing Price Indicator reflects the current general improvement of sentiment in Latvian society. The improvement of the sentiment is one of the factors that could gradually start promoting the growth of interest in housing loans and purchase of durable goods,” says SEB’s Latvian household economist Edmunds Rudzītis.
Rudzītis warns however, that the situation in the Latvian economy continues to be fairly complicated and the economic recovery process is likely to be convoluted.
“Therefore, in the near future we may see a halt in the rise of the Housing Price Indicator’s value and most probably Latvians’ sentiment will become less optimistic. Expectations about a rise or drop in housing prices will be influenced by several factors. Firstly, the consolidation events of the year 2011 budget, including also potential changes in the real estate tax. Secondly, changes in utilities prices and thirdly, changes in the legislation, which might influence the terms of receiving housing loans.”
