The new restrictions can also bring surprises to the real estate market: supply can fall and prices can rise

On Wednesday, the government decided how Lithuania will continue to live as the number of coronavirus cases increases.

Although a final decision has not yet been made and, as explained, the exact restrictions will be decided on Monday, it is expected that people without a passport will not be able to use beauty salons, travel to larger non-food stores, will be restricted. of events and trips and even public transport.

There would probably be no more commotion

The real estate market has been in full swing in recent years. At the beginning of the first quarantine, real estate sales, which had almost completely stopped, then soared to such a height as for the developers themselves, and the Lithuanians, who kept record deposits in the bank, seemed to sweep away everything. it was close at hand until he seemed to have nothing to buy.

Today, according to Dovydas Poderis, senior economist at the Macroprudential Analysis Division of the Bank of Lithuania, the overall level of home sales in Lithuania continues to rise, albeit in the main apartment market as early as May-June. A return to pre-pandemic sales levels was observed.

According to the Records Center, total residential home sales have been growing from January to June this year.

In June, the market calmed down and 7% of the homes were sold. less than in May, but the number of sales remained historically high: a similar or higher number was registered in the last decade only in April-May of this year ”, he said.

This year, he said, is generally distinguished by strong activity in the first half of the year, as seen in other countries, where prices and sales grew rapidly, and in June. due to higher prices and reduced options due to insufficient supply.

“The uncertainty about the pandemic also remains, making it difficult to predict how the market will develop in the coming months.

However, there have been recent signs of supply growth, with sales declining that helped “increase” the housing stock and close the gap between supply and demand. This would reduce the pressure on prices in the coming months, “Poder said, but added that at least for the moment, growth in house prices remains sluggish.

When asked how the new government restrictions on the Passport of Opportunities could affect the real estate market in the near future, it was argued that this could happen through the consumption of the population.

“Some of the savings that are still growing could go to real estate.

On the other hand, the introduction of restrictions would not be the same unexpected impact that it had at the beginning of the pandemic. For example, people who needed a new and larger home due to the need to work from home are already looking for it or have already found it.

Therefore, the new restrictions could potentially affect the housing market, but it is difficult to predict the magnitude of the impact, ”said the LB economist.

Prices will continue to rise

Sigismund Mauricas, an economist at Luminor Bank, told Delfi that the imposition of restrictions is likely to lead to a sharp rise in property prices, which would be linked to an increase in real estate demand, which is likely to increase the share of real estate . people who work from home would have limited opportunities to travel, receive certain services, and simply have nowhere to spend their money.

“The more time a person spends at home, the more important they become to him, the more he tends to spend more money on them.

You see, if some activities only work with the Opportunity Passport, some will not use it, some will not be vaccinated, a third may forget the passport at all, the phone will be uncomfortable, there will still be such inconveniences, administrative barriers, and if there are psychological barriers , people tend to consume less, spend more time at home.

There was also talk of possible local quarantines, which is a signal sent by the government to relax, continue working from home or a farm, which can automatically increase the demand for real estate.

I mean, as long as the narrative is like this, I think people will continue to prioritize real estate, ”he said.

According to the economist, even if it is decided that only vaccinated people can work in some sectors, this could become another challenge when it comes to coming and bringing workers from third countries.

Ž. Maurice explained that the pace of construction is currently slower than it would have been without the global coronavirus crisis, and demand remains higher than supply.

“I think that with restrictions, the pace of construction can slow down, because, as I said, only because of the workers, because of the supply of goods, because of the rise in the price of some goods, others may be waiting for them to be cheaper,” he added .

The economist said that total annual property price growth in Lithuania should exceed 15% this year, but if new restrictions are introduced, double-digit price growth is likely to continue.

“From 15%, about 10% more. To grow. But then young people become very vulnerable, the affordability of real estate becomes cosmic.

Some may emigrate, but I would like it to be more favorable for Lithuania to apply lower restrictions than the European Union average, ”he said.

Excluded by sector

Martynas Žibūda, Development Manager at Eika, said that so far the two different phases of quarantine have had a very different impact on the Lithuanian property market.

According to him, if after the first quarantine was announced the acquisition transactions practically stopped, then in its second phase it provoked a special activity of buyers.

“Given that the post-pandemic situation has changed significantly today, the new quarantine restrictions are likely to have a different impact on the Lithuanian real estate market.

I would like to believe that this will be an intermediate scenario between the two that have already happened: less painful for the commercial real estate sector and less unbalanced for the residential sector, ”he predicted.

Mr Žibūda said that he believed that the companies that manage hotels and catering services would continue to survive the most difficult times, although on the other hand, he added, it could be said that this was the best time to buy hotels, although in terms of offices, his attractiveness was not improving.

However, according to him, the restrictions imposed by the government will affect more companies in the retail and horeca (catering and hospitality) sector, whose loss of income will create tensions between tenants and owners about who will bear those losses.

“But now that we have enough free vaccines, both residents and businesses already have alternatives. Therefore, without a doubt, those companies that will be able to react and adapt the most can become the biggest winners in such an uncertain situation, ”said M. Žibūda.

Without the Passport of Opportunity, there is no cinema or bigger stores

Delfi has already written that the government is gradually preparing for a possible increase in the number of coronavirus cases and has prepared a plan for it.

It was announced that the new restrictions would be proposed without quarantine, changing the resolution that defines emergency management.

The publicly announced draft resolution establishes that only people with an Opportunity Passport can continue to use the services freely.

It has been defined as the vaccination of people who have received a full vaccination schedule, who have developed COVID-19, or who have had a negative COVID-19 test performed at least 48 hours prior.

In addition to the Passport of Opportunities, residents will have restricted access to shops, markets, other public outlets, leisure and entertainment venues, catering establishments, restaurants, cafes, bars, nightclubs and other entertainment venues, casinos, etc. , as well as commercial and non-commercial cultural, entertainment, sporting events, celebrations, fairs, festivals and other meetings in public places, etc. will be restricted. Read more here.

Although it was stated that the restrictions would go into effect on September 13, some of them should go into effect in the near future, following a government decision.