Warn those who have invested in rental housing: the biggest changes are waiting this year

V. Rūkas presented the latest data on the Lithuanian investment index calculated by INVL at a press conference on Tuesday.

They show that at the end of 2019, both last year and the last decade, stocks had the highest return on investment in Lithuania.

“Last year, the Lithuanian stock market grew as much as 15.4 percent. Despite fluctuations over the 24-year period, the country’s average annual return on equities was 8.9 percent. Per year and Over the past 10 years: 10.5 percent. In the first quarter of this year, the country’s shares suffered -15.1 percent. Long-term returns since 1996 have been 0.8 percent. This dropped to 8.1 percent. percent, ”the company said in a statement.

Last year, the second place in terms of return on investment was invested in housing, which grew 7.2% last year and, taking into account rental income, 11.5%.

“In the last 10 years (until the end of 2019), the growth of the average annual value of housing income in the country was 6.8%, and during the calculation period of the 24-year index, the average annual return on income Housing was the most profitable among the country’s asset classes and reached 13.9 percent. Earlier this year, rental housing performance, despite the contraction, remained positive, reducing annual performance over the long term. term at just 0.1 percent from 1996. to 13.8%, “the report said.

Last year, growth in bond prices in Europe continued, and yields on Lithuanian and German bonds hit record lows.

“Although the yield on Lithuania’s long-term bonds increased to 1.5% last year, it has not outpaced inflation in the past three years. Lithuanian bond yields exceeded inflation only in 24 and 10 year periods In 2019, the yield on Lithuanian bonds was below the yield on long-term 10-year bonds in Germany and the United States. The yield on government bonds changed minimally in the first quarter of 2020, reducing yields to long-term at 0.1% between 1996 and the end of the first quarter of 2020. at 6.1%, “the report reads.

The performance of Lithuanian deposits in 2019 remained at zero level for the fifth consecutive year, as it was in the first quarter of this year, so the long-term average return for this asset class has not changed since 1996 and it has remained at 4.4 percent. According to data from the end of 2019, the return of the country’s deposits exceeded inflation only in the 24-year period, when it fell last year and in the last decade.

The first trimester

Speaking about the impact of the coronavirus pandemic on investment, V. Rūkas suggested concentrating on a longer period of time.

“In the long run, the impact was minimal. In the case of Lithuania, the average return on shares was 9%. Since 1996. They fell 15 percent in the first quarter. Average annual earnings fell 9 percent. To 8 percent. Still, the stock’s normal and natural performance was sustained over a long period of time, “he said at a press conference.

V. Rūkas noted that house prices in Lithuania did not react to changes during the first quarter. “There have been no changes,” he concluded.

“The same is true of bonds or deposits,” added V. Rūkas.

Outlook

An INVL representative taught that not much can be expected from deposits in the near future.

“As it is currently 0%, a similar return is very likely to be maintained. Unless banks compete for money, which does not appear to be the case at the moment,” said V. Rūkas.

He also said that Lithuanian bonds adjusted slightly during the first quarter.

“The negative interest rate already shows some return. However, significant changes should probably not be expected in the future,” he predicted.

V. Rūkas also speculated that rental housing in the near future will likely bring about the biggest changes.

“Rental income will be the hardest hit. There has been a sharp drop in rental demand, especially for short-term rentals, so rental prices are likely to have started to adjust slightly already.

House prices have not yet been adjusted, this market is internal and is not subject to changes as fast as the stock market. However, if the economic crisis continues, there will be pressure on prices, “he said.

V. Rūkas also said that stocks earn significant long-term returns.

“Short-term fluctuations are reversed in the medium and long term,” he said.

The Lithuanian investment index, which consists of money market instruments (deposits) valued annually since 1996, long-term government bonds, rental housing (costs have also been valued since 2016) and corporate stocks, grew for the eighth consecutive year on Last year, it totaled 7.1, and its average annual earnings between 1996 and 2019 were 9.7 percent.

Due to changes in the markets in the first quarter of this year, the average annual earnings of the Lithuanian Investment Index decreased by 0.2 percent in the first quarter of 1996-2020. they point to 9.5 percent.