Swedbank: Young people prefer secondary market apartments, but new houses

TALLINN - Swedbank's home loan statistics reveal a shift in the home-buying preferences of young people under 30 over the past year. While they increasingly favor secondary market apartments over new developments, the trend is reversed for houses, with a growing preference for new or completely renovated homes.

"For apartments, the change has primarily come at the expense of new developments. While new apartments previously accounted for about a third of all transactions made by young people, last year their share fell to 24 percent," said Anne Pärgma, head of housing loans at Swedbank.

The most apartments are still being bought in buildings constructed before the year 2000. The change in this segment has been minimal, with the transaction share remaining at around 40 percent. However, the share of apartments built between 2000 and 2023 has grown the most, reaching 36 percent according to the latest data.

According to Pärgma, this shows a clear shift towards newer, but not brand-new, homes. "This indicates that there is more choice and also more demand on the secondary market. Additionally, a several-year-old or thoroughly renovated apartment often offers young people a better price-to-quality ratio than a completely new home," she explained.

The newer the apartment, the larger the average loan amount: for an apartment built before 2000, the average loan is nearly 90,000 euros; for an apartment completed between 2000 and 2023, it is about 170,000 euros; and for a new development, it is nearly 190,000 euros.

Although the loan amounts taken for purchasing new developments are still the highest, the year-on-year change has been the smallest. For new developments, the average loan amount for young people has grown by only five percent. Meanwhile, on the secondary market, average loan amounts have grown much faster, by 13 to 16 percent depending on the apartment's age.

For houses, the picture is different. Young people are buying significantly fewer houses built before the millennium than before and are increasingly choosing houses completed after 2000 or brand-new ones.

Houses built before 2000 accounted for only 17 percent of house purchases by young people last year. Compared to the previous year, the share of such houses dropped by a full 22 percentage points. At the same time, the share of both new houses and those built between 2000 and 2023 has grown, reaching 44 and 39 percent, respectively.

Loan amounts for house purchases have grown at a fairly steady pace across all construction years, increasing by up to 16 percent over the year.

Slightly over half of young people under 30 take out a home loan alone. The difference is clear when broken down by housing type: while approximately two out of three people buy an apartment alone, essentially only one in four young people buys a house alone. "This suggests that for young people, buying a house is more often a joint, long-term decision, and the higher price of houses also plays a significant role," Pärgma explained.

While the average loan amount for houses built before 2000 is around 115,000 euros for young people, it is around 233,000 euros for newer houses. The average loan amount for brand-new houses reaches nearly 241,000 euros.

Looking at the overall picture, it is important to note that young people buy significantly fewer houses than apartments - approximately one house for every four apartments. Taking all home loans for young people into account, the average home loan amount is around 140,000 euros, and the loan is taken for an average of 28 years for both apartments and houses. Considering the average loan amount and period, this usually means a monthly loan payment of between 600 and 700 euros.

Regionally, there have been no major changes, and young homebuyers continue to congregate in larger centers. Approximately 60 percent of homes are purchased in Tallinn or Harju County, 20 percent in Tartu County, and the remaining 20 percent elsewhere in Estonia.

According to Swedbank's data, young people under 30 make up about a quarter of all the bank's home loan clients, and their share has been gradually increasing in recent years.