The situation in the real estate market is heating up: own housing in the city can become a privilege for the rich

Developers are forced to raise prices

Martynas Žibūda, Development Director of Eika, spoke on the “Monetary Affairs” program that the impact of the pandemic on the real estate market is positive rather than negative, however, it is not possible to enjoy high demand and rising prices alone. .

“On the one hand, I could smile and be glad that sales are growing a lot, buyers are very active. Suppose the last two months, January-February, are even one-third higher than last year’s record sales. That full decline started in March and April, so when we capture March and April of this year, statistically, the growth will be even higher. On the one hand, a very nice and developer-friendly situation.

During February, we sold more than 70 apartments, which we have never done before, but on the other hand we see that buyers are much more active than sellers because developers simply cannot supply so many apartments to build anymore, which is already causing something. tensile.

For example, the stock of unsold apartments for 9-12 months is currently reduced to 4 months. Which means that if the developers and developers did not submit any new projects, then those vacant apartments that are currently on the market will be sold in four months. And that is a small distortion in the market. This, of course, and affects the price of the house. Developers are forced to raise prices and thus reduce demand, ”explains M. Žibūda.

The money saved is invested in real estate

Marius Dubnikovas, a financial consultant and vice president of the Lithuanian Business Confederation, stated on the Monetary Affairs program that the pandemic did not function in a classical way. This was due to the large amount of money on the market that people were unable to spend due to the pandemic.

“Money went up because wages were going up. Everyone fears that money printing could have a negative effect in the sense that the value of money is starting to decline. While inflation rates show that inflation is within from the norm and not somehow cosmically high, on the other hand, everyone intuitively understands that the policies of the ECB and other central banks to print money mean that the value of money may fall in the future. This determines that people start investing. , and those investments in the world target various asset classes, but in Lithuania, as real estate is the most popular investment instrument, we see a very large activation, ”said M. Dubnikov.

According to a financial advisor, if you buy a house as a rental investment, then it is quite sustainable. However, the number of home and vacation buyers increased.

“There is a slight tendency that after closing the borders and difficulties in traveling to exotic countries, investing on the Lithuanian coast becomes more popular. The cities of the rich, namely Vilnius, Kaunas are buying a second home. (…) As of today, it is obvious that the deposit has not worked, you will get some interest, but it is low. A rental investment is one thing. Another thing is that trying to compensate for the inability to go abroad to stay in a country determines that we buy a home on the Lithuanian coast. Looking ahead, this is the first option where buying for rent is more or less sustainable. The second option, when buying a vacation home to go out in the summer, seems a bit strange, because before the house was little fun for anyone. In this place, when the pandemic is over, it will be seen how different solutions have yielded different results, ”said M. Dubnikov at the fair.

According to M. Žibūda, Eika divides his clients into 7 groups of buyers. The largest of them are investors, who previously accounted for about 35 percent. of all buyers. However, due to the introduction of the first quarantine, this group contracted, saw the housing market change, and returned only in the fall. The lone shopper group is said to have been the least affected by the quarantine.

“Our data shows that 4 out of 10 buyers are people who buy homes for their own money. It is not about lending money. We really see that people have money and solve the problem of the security of money, the problem of value. When economists say there will be doubts about the value of money, they choose what seems safe to them. And housing is the safe investment object in their eyes. Aside from the fact that statistically home values ​​are growing 5 to 6 percent a year. Even if you buy a house and don’t rent it, you already get a certain increase in value, ”said M. Žibūda.

Housing in the city can become a privilege for the wealthy

The Development Director of Eika recalls that until now the price of housing has been growing more slowly during the year than the income of employees. However, there is a visible trend that this may change.

“This is the time when housing is likely to start growing faster than income. I see this threat because the relationship between supply and demand is really unbalanced. The developers are facing a development problem in Vilnius: we are waiting for the new general plan, it is still missing. Many investments and plots are already planned, but waiting for the green light to go on, God forbid, in June.

There is an infrastructure law that changes the rules of the game, there is additional investment, not to mention that the public discourse, the coordination in the municipality with the neighbors, the institutions is greatly extended. To this day, the developers have sold out their barns, practically already announcing what they have designed. Suddenly, as demand grows, it’s really not easy to quickly take on and deliver new departments, ”said the interlocutor on the show.

According to the financial advisor, the process is starting in Lithuania, which was previously in Austria and Switzerland. The rich will be able to buy homes in the big cities, and the middle-income will have to find housing in smaller cities.

“It just came to our attention then. You can joke that nature fixes everything in all systems. At this point, when we see record heights, it means that some of the record heights will have to fall because there is no way the graphics will just move in one direction It will be difficult to say when this will happen, but so far, depending on how the trade is going and how much money is in the market, this trend is likely to continue and shape another trend.

Even though wages actually grew faster than the price of real estate, it should be understood that wage growth was primarily driven by MMA, so real estate could not be purchased before and even if they increased, probably not. possible to acquire. You would see a trend to see a process in Lithuania that took place 50-60 years ago, after WWII, in Austria, in Switzerland, where real estate becomes inaccessible for people with low or even middle income. It is available to wealthy individuals and mutual funds. We will probably see such a process exclusively in large cities that real estate will become a privilege for wealthy families and investment funds, and in smaller cities and suburbs it will be possible to buy homes for that median salary, ”predicts the analyst .

When asked whether it would not be the case that housing became a privilege of the rich only in Vilnius, M. Dubnikovas added that people in Kaunas, Klaipėda, Šiauliai and Panevėžys also have significant savings.

“Of course, the greatest accumulation will be in the capital and the tension there will be greater because even if a person who lives in the region seeks to keep his savings and thinks about a rental home, he is really considering where those rents could get the most. . Most can be obtained in the capital. Even a person who accumulates money in the region usually buys a home in the capital, “said the analyst.

However, Dubnikov emphasizes that it is not necessary to talk about the bubble formed yet, because the money supply to the market remains strong due to central bank policy. A bubble can be made up of a couple of threats.

“It just came to us then. Because the situation is supported by people’s income. They are big enough and we would need several things to talk about the housing bubble, the price explosion. First, if we see a significant increase in unemployment, layoffs and the inability to pay mortgages. The second thing that is much more threatening today and that is gradually building up is rising inflation and potentially rising interest rates. This would mean that home premiums would increase further and some families would no longer be able to repay the loan. However, many properties are bought in cash, unlike 2008, “said M. Dubnikov.