What surprises will the real estate market consume next year? What needs to happen for prices to go down?

Arvydas Avulis, Chairman of the Board of Directors of the real estate company Hanner, Arnoldas Antanavičius, a real estate analyst, and Žygimantas Mauricas, an economist at Luminor Bank, spoke about real estate trends on Delfi Keturios sienos TV show next year. The experts answered questions about possible changes in house prices, demand and supply. It is true that their predictions and opinions differed.

Economist Ž. According to Maurico, housing has become a commodity this year, as people who saw the first quarantine at home have seen all the shortcomings of this.

“People have also saved money that they would otherwise spend on travel or leisure. They are ready to use that money to buy real estate. I think there is a bigger threat next year that demand will exceed supply. And we, like Many other Western Europeans, we see prices rise. To avoid this, supply must be further promoted, at least in the main Lithuanian cities. In order not to create a real estate price bubble, “says the interlocutor.

Housing has become a staple good

According to Ž. Maurico, this year has shown what surprises can affect the real estate market and the economy. The economist points out that at the end of last year no one expected the world to face such a major crisis this year as a result of the pandemic and its fears.

On the other hand, there were few believers that the real estate market this time, unlike practically all the crises that have occurred so far, will suffer so little, and in many countries it will not only not suffer, but will also reach all-time highs. This crisis is specific because it did not have and will not have a negative impact on the real estate market, because, as I mentioned, housing became a commodity during this crisis ”, emphasizes the economist.

Real estate analyst A. Antanavičius also points out that the real estate market depends on the mood of the population, potential home buyers. It is this factor, he said, that will also be of great importance next year.

“The situation we find ourselves in now is unique and it is difficult to say what it will be like. You can try to think in this direction: since a lot of money is being printed and poured into the market, the real estate market in Lithuania should be more active and perhaps prices should go up. But money printing itself doesn’t guarantee it yet. You can print a large amount of money, but if they are in people’s accounts, there will be no changes. For prices to rise, that money has to circulate. And the main aspect that determines this is the moods and fears of people. It will depend on how people feel next year and what the real estate market will be like ”, explains the interlocutor.

A. Antanavičius goes on to say that if people remain optimistic and believe that saving the economy by promoting consumption will be successful, will have money and will be willing to spend it, then there is a high probability that most of that money will go to real-estate market.

“And it will encourage and warm it, maybe we will see some bigger records. On the other hand, the scenario may be that if we have a difficult situation of coronavirus, severe quarantine and more and more businesses close, people lose income, the government leaves. of distributing money, as we have seen so far, it may not increase but decrease because people would begin to “burn” their savings, “says the interlocutor, adding that people are more likely to take risks and continue buying real estate.

A. Antanavičius cautions that most real estate buyers today buy a home because they expect property prices to go up, so they want to guess the train with lower prices, which heats up the market as needed. By the way, according to the real estate analyst, talking about the decrease in the housing supply makes him smile.

“I don’t know who is reporting it, but it is not very real that there is nothing to choose from. There are almost 100 real estate developers in Vilnius alone, and even if some of them have reduced or postponed their plans, others will boldly come to their place. I have to. communicating with developers from other countries, so they are looking for opportunities to build something in Vilnius, but they face the problem of acquiring land, they could offer housing even earlier if plots arise. <...> As long as there is such a purchase as it is now, it is illogical for developers to refuse to build ”, emphasizes the interlocutor, adding that those developers who say that the supply will decrease will encourage residents to buy and participate in public relations campaigns.

There may be nowhere to build

A. Avulis, chairman of the board of the real estate company Hanner, agrees that housing supply problems can only be caused by a lack of land.

“The only question here is whether there will be supply on the market. Builders certainly will be, but the problem: where to build. Today, plots are not sold at auctions, it is especially difficult to buy a plot in Vilnius and, if you have Success is a big risk. Until now, the policy of the National Land Service has been quite aggressive, there was a desire to terminate land leases and investors are reluctant to take that much risk. If the policy does not change, just do not there will be nowhere to build. In this case, the offer can be adjusted accordingly, “explains the real estate developer.

The interlocutor says that the influx of buyers in the real estate market was felt already this fall. According to him, the “compressed spring” principle worked: it took time for buyers to regain confidence in their financial situation, the economy and the housing market.

“The biggest jump was in October, when more than 600 apartments were sold in Vilnius. It is not easy to predict what the market will be like next year. There are many circumstances that can influence buyer behavior. On the other hand, the assumptions that we can What to do today when we see the market are that the biggest problem or reason that has hindered some people’s access to housing is the risk and fear of a pandemic, the fear of losing income. But now we are seeing the light at the end of the tunnel It is about the vaccine and it can be expected that the second half of next year will be very active in the market, because the factor that has inhibited it until now will not remain ”, explains A. Avulis.

According to the interlocutor, the behavior of the buyers is likely to be freer, they will return to a normal rhythm. This is already noticeable today when home sales are counted.

Price forecasts

Those who follow the real estate market know that the sale of houses will slow down in December and January. However, according to A. Antanavičius, such seasonality can easily disappear, as it happened in the spring.

“This spring, if we are positive, there will probably be transaction activity, we will compare it to the pandemic spring and we will see incredible jumps. If the quarantine continues in the spring of next year, the situation will be different. So far, we see that people are not there. willing to wait, ”explains the real estate analyst, adding that each week may present a new surprise.

Residents are actively looking around and buying real estate. According to real estate analyst A. Antanavičius, such a decision may be determined by reluctance to wait or a belief that property prices will rise next year.

A. Avulis, chairman of the board of the real estate company Hanner, says that by looking at the trends in real estate prices this year, you can see that prices have been growing at a normal rate, around 5 percent.

“We are seeing a normal and natural rise in prices, which is slightly above inflation. It is possible to make fairly strong assumptions that this trend will continue into the future. Clearly, there may be slight deviations and this may be related to the activity of the Bank loan market, supply and policy No one can predict very accurately today. <...> If the supply is higher, there is no possibility that prices will grow, if the supply is higher than demand, prices may go down ”, explains the real estate developer, adding that there is a probability that real estate prices will remain similar and we will see 4-5% by the end of next year. Normal annual growth in the value of real estate.

However, according to A. Antanavičius, it is naive to assume that prices will grow as usual (4-5% annual growth): when that short cycle will start is difficult. I would like to point out that real estate prices depend on how much residents agree to pay for that property. In the current situation, <...> The belief in rising prices and the devaluation of money is a pretty realistic scenario.

In my opinion, in order for prices not to rise or begin to fall, one or more significant moments must occur: banks must radically change their debt policies, raise interest rates, etc. or unemployment must rise significantly, people must not provide income. In such cases, the current good mood would worsen. So far it doesn’t seem to be happening, everyone is encouraging to buy, people are optimistic. “

There is disagreement on the housing price bubble

Real estate buyer activity for economist Ž. Mauricio wonders if there are currently the first signs of a property price bubble. According to A. Antanavičius, he also sees favorable conditions for the formation of the property price bubble.

“Of course, at the moment that issue is more philosophical, because there are no clear criteria or parameters to say that it is a bubble,” says the real estate analyst and emphasizes that even after naming that there is currently a real estate price bubble in Lithuania, it’s hard to tell when it can explode.

“Nobody will say that, because real estate developers, even if they see it, will not say it: they realize that prices are like this, they can go down, so now is the time to make money. <...> Such a game is being produced and no one can say how big it will be ”, emphasizes A. Antanavičius, adding that it is about the apartment market.

However, A. Avulis says the talk about the house price bubble makes him smile: “First of all, the sign of the house price bubble is a double-digit rise in house prices. <...> We did not notice significant price increases in the Vilnius market, I think the conversation about the bubble is populist. After all, if there was a bubble, people would have to be afraid if we wanted to scare. But in reality, the market itself controls everything very quickly, because in such circumstances, prices start to rise. When there is a real estate price bubble, people just stop buying a house and stop buying it. Then the supply decreases quickly and everything returns to its original place. “

According to A. Avulis, today there are no signs of a property price bubble in the Lithuanian property market, in the Vilnius property market.