The European Central Bank is likely to raise rates in the future and this, coupled with inflation, will likely push the prices of high-end property down, experts have said. The number of loans taken out has not yet fallen, but may do in the future.
A rate rise of 0.5 percent is expected in September and maybe another of 0.25 percent in October and December, Anne Pärgma, Swedbank's head of housing loans, told Friday's "Aktuaalne kaamera".
"To give an example, if the loan amount is of the order of magnitude €50,000, then the amount of the monthly payment, if the Euribor rises by 1 percent, this means an additional €25 is added to their loan payment," she said.
The six-month Euribor, currently at 0.63 percent, is expected to rise further in the future, Pärgma said.
"The average loan period is 25 years, so you have to be prepared for the Euribor to rise above 1, above 2, above 3 [percent]. Historically, it has also been above 5 percent. You should definitely be prepared for the fact that the Euribor may rise during a loan period," the expert told AK.
Rate increases have not yet put people off taking out loans.
But, given the Euribor's rise and inflation, the number of real estate transactions is expected to fall, real estate agents believe.
Uus Maa real estate agency analyst Risto Vähi said some people will struggle to cope with increases.
"We are starting to see that, obviously there will be less borrowing, fewer purchases, transaction activity is falling, but this is definitely only one part. There is also a big price increase, general uncertainty — we can see all of this together," said Vähi.
Vähi said the prices of overinflated higher-end real estate have fallen and are expected to fall further but it is hard to predict by how much.
Editor: Helen Wright