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RE market participant projections: Flat rent to be cheaper, selling prices – to rise only modestly

April 12, 2017

There has been an increase in the number of real estate (RE) market participants who believe that the price of flat rental in Vilnius will be down, while their opinion on the prices for new flats on sale is slightly different: an increase in prices, although modest, is expected. This is reflected in the latest Survey of Real Estate (RE) Market Participants, conducted by the Bank of Lithuania. 

‘RE market participants assess that, when renting a new build flat, annual return in Vilnius can be 4 to 6 per cent. It is therefore no surprise that almost every third deal of purchasing a new build flat in the capital city is made in order to rent this acquisition afterwards. Moreover, according to the data of the Survey, nearly half of buyers of new build flats in the capital purchase them in cash,’ claims Vaidotas Šumskis, Senior Economist of the Macroprudential Analysis Division of the Bank of Lithuania.

The expectations of RE market participants regarding the selling prices for new build flats are uniform across all major cities: an annual increase of up to 5 per cent is projected.  More than half of the surveyed believe that flat prices will go up in central Vilnius, while about half of the surveyed – they will go up in residential districts. A similar share of market participants in Kaunas anticipates increases in flat prices in both central Kaunas and other residential districts – so believe about half of the surveyed. The share of those who think that in major cities the prices will be up by more than 5 per cent was significantly smaller. 

In Vilnius, an insubstantial fall in flat rent prices – of up to 5 per cent – can be anticipated within 12 months. One-third of RE market participants think that the rent prices in the centre of the capital will be down over the next year, while nearly half of the surveyed believe that the same trend will continue in residential districts.  Compared to the survey conducted half a year ago, those holding the opinion that rent prices in Vilnius will go down by more than 5 per cent increased significantly in number. Unlike in Vilnius, Kaunas flat rental market is characterised by a positive sentiment: market participants anticipate modest rent price increases both in the centre of the city and residential districts.

The largest number of people buying new flats and investing in rent is in Vilnius. In the opinion of the respondents, in Vilnius, new build flats are purchased without a loan by 40 per cent of the buyers, while nearly every third of buyers purchase them for rent purposes. In Kaunas and Klaipėda, the shares of those purchasing with own funds and for rent were smaller: in Kaunas – by 30 per cent and 15 per cent, in Klaipėda – by 25 per cent and 15 per cent of total buyers respectively. 

The image of a buyer of a new build flat in Lithuania’s major cities, in the eyes of RE market participants, remained significantly unchanged. Most of the RE market participants surveyed reported that the typical buyer of a new build flat was a resident aged 25–35. In the capital city, housing in the central part is particularly in demand; the number of buyers with an income higher than average keeps growing; there is an increasing number of unmarried persons purchasing housing. 

For more information on the insights of real estate market participants, see the latest Review of the Survey of Real Estate Market Participants conducted by the Bank of Lithuania. The Survey is conducted on a quarterly basis, and its Review is published bi-annually.

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