2014-02-06
Forecast: No changes pending in the real estate market due to the adoption of the euro
Most commercial banks and households are expecting stability in housing prices in the next 12 months. While there are those who are expecting more extreme changes, there are no grounds for these expectations to come true, noted Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, at the conference “The RE market 2014: New Opportunities” arranged in Vilnius by the Lithuanian Real Estate Development Association (LREDA). The preparations for the adoption of the euro in Lithuania in 2015 were also discussed at this conference.
“We are projecting that euro adoption will not rock the real estate market, as the situation is different from that during the years of the former boom. The Responsible Lending Regulations, approved by the Bank of Lithuania more than a couple of years ago, significantly reduce the influence of groundless expectations and of the formation of bubbles. Financial stability is one of the Bank of Lithuania’s undisputed priorities; therefore, once we identify a new risk of overheating, we will react immediately,” said V. Vasiliauskas.
According to him, the Bank of Lithuania is projecting to expand the application of the so-called macro-prudential tools that will help ensure sustainable development of the credit market and of the real estate market at the same time.
Based on the data of the survey conducted on behalf of the Bank of Lithuania last autumn, in the next 12 months 40 per cent of households did not expect housing price increases, 22 per cent expected they would increase by one-tenth, nearly 14 per cent projected 10 to 20 per cent growth, while above 8 per cent believed they would go down by up to one-tenth. Commercial bank projections for housing price developments in the next 12 months were as follows: nearly half of them believed that housing prices would rise by up to 10 per cent, over 40 per cent — that they would go down by up to one-tenth.
Based on the data of the commercial banks survey, in 2014 the demand for business loans will keep rising; housing loans will boost the loan portfolio as well. The loan portfolio of the banking sector will expand by about 3 per cent over a year.
Following the coming into effect of the Responsible Lending Regulations, new loans are issued without exceeding 85 per cent of the value of assets pledged, thus the risk for the lenders decreases, while the borrowers must acts with greater responsibility, because, prior to assuming obligations, they must save 15 per cent of the value of the assets they want to acquire. Under the Regulations, save some exceptions, the ratio of maximum credit, which is granted for the acquisition of agricultural land plots to assets pledged, will not be higher than 40 per cent of the land plot acquisition price or its market value.