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Expectations regarding house prices in Lithuania in early December, when restrictions on the second quarantine had not yet tightened, were historically high. In the Vilnius region, the number of residents who said that the price of residential property will increase in the next twelve months was particularly high, up to 70 percent.
Residents seem to remember that during the first quarantine, house prices avoided correction, so they are not inclined to think as pessimistically about house prices as they were in the spring. It is true that, given the persistence of the poor epidemiological situation in the country and the persistence of the strict quarantine restrictions for longer than expected, the population’s expectations are expected to worsen in the first quarter of next year.
A survey commissioned by SEB Bank showed 54 percent. Lithuanian residents surveyed believe that the price of housing will increase in the next twelve months, 12 percent predict the housing of pigs, 24 percent. Do not expect changes, and the remaining 10 percent. has no opinion on this matter. The value of the SEB Bank House Price Expectations Index, calculated as the difference between the percentages of those who predict that house prices will rise in price and prices, was 42 points. In September, the difference was 37 points, compared to 46 points a year ago.
The minimum of expectations was reached in March, when only 19 percent. respondents thought housing would get more expensive over the years, and even 40 percent. respondents considered that pig housing.
As in September, residents of the Vilnius region stood out optimistically: in December, up to 70 percent. respondents said that the price of housing in Lithuania will increase in the coming years, and only 9 percent. I thought it would decrease. There have not been such high expectations for more expensive housing in the Vilnius region since 2012, when this survey was first conducted.
In the Kaunas region, the population’s expectations did not change during the quarter: 45 percent. respondents believed that the cost of housing will increase in the coming years. A year ago, 56 percent thought so. population of the region. It is true that in Kaunas, compared to other regions, there was a relatively large number of respondents who thought that house prices would not change. This was stated by 35% in December. surveyed residents of the Kaunas region. In Klaipeda, the population’s expectations of house prices were the most modest: 39 percent thought that housing would become more expensive. surveyed.
The second quarantine no longer scared residents and real estate market participants, probably because everyone remembers that the first quarantine managed to prevent a drop in house prices and, as is often the case, we forecast the same recurring scenario for the future. You just have to remember that we are living in a pandemic and things can change in both positive and negative directions, so the fact that the losses from the first wave of quarantine in the housing market were small does not guarantee that it is the same now. . This strict quarantine is very likely to last longer than the first, so fewer transactions will take place not only in December or January, but also in February and March. It is true that there is a high probability that, like this year, we will see strong turmoil in the housing market in the second quarter. If such a scenario turns out to be true, it is rational to expect the median home price to be higher next year than this year.
In 2020, the median house price in Lithuania probably increased by around 6.5%, slightly slower than in 2019 or 2018. If we look back at the end of the year, we could say that such changes are not surprising: the Average salary has grown more than 9% this year, therefore, the housing affordability indicators have improved even more in Lithuania. In addition, the average interest rate on new home loans was lower, which also increased home affordability. The value of the SEB Housing Affordability Index, which has been compiled over many years (assuming Vilnius residents receive an average salary in the municipality, they borrow for 20 years at 20% of the house price calculated on the basis of the average transaction price in the capital), increased in the third quarter and shows that a resident of the capital can buy a 52 m2 apartment per year, or 3 square meters larger than a year ago.
Incidentally, another survey commissioned by SEB Bank in late October showed that the proportion of the population planning to buy a home in the next three years has hardly changed from the previous year. This shows that, at least so far, the pandemic has not stopped the desire and opportunities of the population to buy their first home or change their current home. This year, 7 percent. Respondents said they intend to buy homes with their own or borrowed funds in the next three years. As in previous years, 6 percent. respondents said they were considering buying a home, but had no down payment accrued, and another 11 percent. He claims that his income is not enough to obtain a mortgage.
The epidemiological situation in Lithuania is still not improving. There is a growing probability that the strict quarantine will last longer than until the end of January, which would inevitably increase tensions in the housing market. In this case, the population’s expectations for house prices in the first quarter are likely to be worse than they are now, but if vaccination in the country accelerates in the second quarter and restrictions are successfully lifted , the housing market and prices will advance again.
The market and public opinion research company Baltijos tyrimai conducted a representative survey of the Lithuanian population in late November and early December on behalf of SEB bankas. A total of 1,000 people between the ages of 15 and 74 were surveyed at 113 locations across the country.
SEB Bank Economist Tadas Povilauskas
