Experts on price increases and real estate rentals: Returning emigrants adjusted the market

The pandemic showed the real situation in the rental market

Mindaugas Kulbokas, Head of Newsec’s Analysis and Research Group in the Baltic States, presented the new trends in the real estate market at an investment seminar organized by Investuok magazine in autumn. Checked the portal Aruodas.lt data since the start of quarantine. According to him, the supply of apartments for rent in Vilnius has quadrupled during the quarantine.

“I am grateful, as an analyst, for the coronavirus, because we have seen the real rental situation, how many apartments are available for rent in Vilnius. Some of the apartments were officially rented, some on Airbnb or other short-term rental platforms. When the market closed and foreigners couldn’t get in, there was a clear shock, with short-term lessors from Airbnb and other platforms. Aruodas.lt. Supply growth in Vilnius of 1 thousand. before the quarantine to almost 2,000. shows that in the Vilnius market 2 thousand. the apartments are for rent, ”says M. Kulbokas.

According to the speaker, this trend shows pressure on supply: “It has often been speculated on the rental market that investment purchases of apartments account for around 10-20%. of all acquisitions. If those numbers were like this, they would be at least 5,000. (appear in ads – Delphi), because in any case there was nowhere to put them “.

According to him, part of the apartments, about 300, appeared among the secondary market sales. This suggests that some investors’ patience has been short-lived.

“I answered my question that about 10 percent. All acquisitions for investment. I saw panic, a short shot in the market: about 300 apartments appeared for sale. Impatient investors tried to sell the property and get out of the position of the investment apartments ”, he says.

In other cities, returning emigrants adjusted the market

The drop in supply in the fall, he explains, is likely related to students who returned to educational institutions after the summer.

The director of Newsec points out that a phenomenon has developed in the secondary cities of Lithuania. It points out how the rental market has changed in Šiauliai and Panevėžys, where completely opposite trends are observed.

“Housing has been declining. The answer is simple: some people who worked outside of Lithuania returned here and started looking for apartments in their cities where they could live. Šiauliai and Panevėžys are places for migrants to return, which had no effect, ”he explains.

Currently, the supply of rental housing in Šiauliai has decreased by 21%, in Panevėžys – by 19%.

“Apartment rental prices have dropped to 10 percent or more in some cases. For the moment, prices have returned to the normal level, so it would not be possible to negotiate with much force, ”says M. Kulbokas about the influence of COVID-19 in the apartment rental market.

“The situation on the market is quite balanced, despite the fact that the supply in Vilnius has increased slightly,” he concludes.

The market has recovered

The analyst points out that many projects are currently being developed in Vilnius, where the supply of new homes is around 3,000. You.

“In August, 2,848 transactions were carried out in Lithuania. Compared to August last year, only 3 percent. Less. 2019 was a record year in terms of the number of transactions. Obviously, the market has recovered ”, he says.
In August, 932 apartment transactions were recorded at the Registration Center and recorded at RC in August. Of these, 514 transactions were carried out in the primary market, that is, from developers. Most of them – 388 apartments – in Vilnius.

“This shows that the market is at a completely pre-crisis level,” says the Newsec director.

What about real estate prices?

As the speaker points out, no one lowered property prices during the pandemic. People were supposedly looking for discounts through other things donated by developers.

“There was a saying that prices will not go down, but the mat: He predicted that prices will fall from 5 to 40 percent. Apparently, no one has come to guess as much as with the macroeconomic forecasts announced at the beginning of the pandemic.

On the contrary, today we are seeing a rise in prices. The reason, especially in the Vilnius market, is that apartment buildings are being built closer and closer to the city center. Sometimes we compare incomparable things: when Perkūnkiemis or another remote area was built, for example Pilaitė, transactions were carried out en masse in the same way, now transactions are carried out in Naujamiestis, near the center, in Markučiai. We have another situation, so we cannot say that the average price of 5 years ago is the same as it is today. In Vilnius, prices are stable enough that there is no risk at the moment, ”says M. Kulbokas.

According to him, bank financing is a very important fact for the housing market. All Lithuanian banks state that they have not changed their buyer loan policy, although employees in some sectors are more cautious. The director of Newsec points out that these people can use other instruments: rent or Rent2buy service, if of course they have the money.

When asked if the surplus of money in mutual funds is not one of the reasons for the artificially high prices, the speaker observes that the rain of money works in two ways: (…)

The investment history has its own rules on which to invest, evaluate risks, etc. Today, it is clear that when the situation has changed and the pressure from the money side, they are following procedures. Sometimes they take too long and institutional funds fail to buy anything good in the market because smaller funds make decisions faster and bypass larger funds.

There are not many assets suitable for larger funds in terms of serious items that are desired by more than one and not two. The transaction, like the Quadrum business center, involved 8 buyers, one even from Asia, all competing with each other. The price increase is really related to that. “

When asked if prices do not seem to be rising too fast and if the house price explosion is not coming, M. Kulbokas believes that the housing bubble does not exist at the moment.

“Nerijus Mačiulis said that nobody would go up in the next 5 years and central banks are afraid to think about it. My answer is that I am not afraid of it either. Central banks are throwing trillions of dollars into the market, which ultimately comes in brick. . (…)

The real estate sector will be a very interesting type of segment, investing billions promised by the states, we are waiting for what will end here. I think there is no real estate bubble at the moment ”, he points out.

Mac: there is a bubble, assuming

Speaking about trends in property markets, Swedbank chief economist Nerijus Mačiulis notes that there has been a structural breakdown in many of the world’s property markets.

“There have been several fluctuations in the past December 8. In the middle until December 9. Prices increased, especially in Japan and the Scandinavian countries. However, at the beginning of this century a strong bulge and detachment from the average began. historical real prices, after estimating inflation, this is due first to deregulation and then to low interest rates.

You can say that there is a bubble here, but it only exists if interest rates are supposed to rise significantly in the future. Structurally, interest rates have fallen to such a low level. This means that affordability has increased, as evidenced by affordability ratings in many countries. Opportunities to obtain loans have also increased, ”says N. Mačiulis.