2017-09-27
The latest Bank of Lithuania survey shows that the expectations of real estate (RE) market participants regarding house prices remain moderate, yet expectations about housing rents in the capital city shifted – more participants believed that they will rise.
‘The survey results reveal that expectations prevailing in the market are rather moderate. Nonetheless, for two consecutive quarters housing prices reached a double-digit annual growth pace, while activity in the housing market remains strong,’ said Andrius Škarnulis, Head of the Macroprudential Analysis Division of the Financial Stability Department at the Bank of Lithuania.
Newly-built apartments
In Vilnius, expectations regarding newly-built apartment prices remained basically unchanged – slightly more than half of the respondents anticipate an up to 5 per cent rise in apartment prices in the upcoming year. However, there were more of those believing that in the near future apartment prices will boost in Kaunas and Klaipėda. Compared to the beginning of the year, the number of market participants that expect a rise in newly-built apartment prices in the central areas of these two cities increased; however, there were fewer of those predicting that newly-built apartments in their residential areas will follow an upward trajectory.
The fastest growth in newly-built apartment supply is expected in Kaunas: as much as 86 per cent of RE market participants presume that here the number of newly-built apartments will exceed that recorded last year, while 57 per cent anticipate that the demand of newly-built apartments will also enhance. As regards Vilnius, expectations with respect to supply and demand diverged: 45 per cent of market participants foresaw a rise in supply, 40 per cent – a slide in demand. 45 per cent of the surveyed assessing the Klaipėda market expected a moderate increase in the demand and a slight fall in the supply of newly-built apartments (36% of total respondents).
Rental market
The second quarter of this year saw an increase in the number of market participants believing that apartment rental prices in major cities will be on an upswing in the upcoming year. Expectations regarding apartment rent in residential areas of Vilnius posted most significant changes: compared to the beginning of the year, the share of those believing that apartment rental rates will rise increased from 15 to 24 per cent, while the share of those expecting a drop in rental prices decreased from 28 to 11 per cent. Similar shifts were observed in terms of newly-built apartment prices in downtown Vilnius and Kaunas as well as the residential areas in Klaipėda.
In the second quarter of this year, residents of Vilnius, Kaunas and Klaipėda bought, respectively, 30, 15, and 20 per cent of newly-built apartments for letting purposes. Klaipėda is a more popular choice among emigrants: approximately 15 per cent of newly-built apartments are purchased by Lithuanian citizens living abroad. In both Vilnius and Kaunas, emigrants purchased a tenth of total newly-built apartments sold.
The majority of RE market participants assessing the office market believed that office rental rates in business centres located in Vilnius, Kaunas and Klaipėda will remain unchanged in the upcoming year. Office vacancy rates, according to the surveyed, will increase in downtown Vilnius and Klaipėda as well as business centres in Kaunas.
The Survey involves representatives of RE development and management companies, RE appraisers, agents, representatives from credit institutions, etc. The RE market and its sustainable development are crucial to maintaining stability of the domestic financial system. In June 2017, loans for house purchase accounted for 40.2 per cent of the total portfolio of loans granted by credit institutions. The Bank of Lithuania monitors the situation in the RE market and assesses its latest trends on a regular basis.