With increasingly more contradictory signs in RE market, Bank of Lithuania intends publishing new RE price monitoring instrument
While the latest expectations about real estate (RE) prices are currently more cautious, this market continues to be heated by transactions whereby a secondary housing, i.e. a housing which in many cases is purchased for letting or probably re-sale, is acquired. To assess the housing market trends more precisely, the Bank of Lithuania intends publishing a new index of recurrent housing transaction prices. This is the topic discussed at the Fifth Annual Real Estate Conference of the Bank of Lithuania.
‘The RE market, which as early as the first half of this year was pulsing with huge energy, has recently been exhibiting more and more hints of cooling, while the latest expectations of real estate market participants are more cautious. The contribution to this stems from both possible changes in the RE tax and the fact that a relatively large share of residents has already done their acquisitions in the RE market over the last two years,’ said Tomas Garbaravičius, Member of the Board of the Bank of Lithuania.
The rate of RE price increases in Lithuania in the first two quarters of this year was one of the highest in all of the European Union; however, the most recent assessments show that housing has already been evaluated sufficiently. In Vilnius relative to other European capitals, housing is far from being cheap; purchasing or letting it costs more than in many other EU countries.
Planned changes in the RE tax, related to the increase of the tax progressivity and taxation of expensive RE, may stir up housing prices and adjust owners’ behaviour. For example, persons who currently own several housings of relatively high value, due to the intended raising of the tax amount, may decide to sell part of their objects held.
Nevertheless, investment in a second housing has been popular: according to the most recent data, about a fifth of housings in the country are secondary ones, i.e. none of the owners live there. A large share of such housing is likely to be let. Since the beginning of last year such housing has risen by about 8 per cent in number – to EUR 278 thousand. This signals active purchasing of housing with the aim of earning on its letting or perhaps re-sale.
To assess the RE market trends more precisely, the Bank of Lithuania intends calculating a special index of recurrent housing transaction prices. According to preliminary data of the Centre of Registers, about 40 per cent of the 11 thousand housing purchase and sale transactions concluded over the last quarter were related to not the first sale of the housing.
‘This index will show developments in housing prices in a more quality and trustful manner. Moreover, data used for the calculation of this index will also enable the Bank of Lithuania assessing the facts of profiteering from RE and developments in the duration of keeping the acquired housing unsold.
It is intended to start publishing the index as of 2018 once work in relation to its creation has been completed.