Housing prices are increasing, affordability has decreased: the best conditions are for Klaipeda residents

Residents’ access to housing decreased slightly in the first quarter of this year, but remained close to record highs, according to the housing affordability index calculated by Swedbank economists. During the quarantine, the number of transactions decreased dramatically, but panic did not occur, so bank economists do not predict significant price changes or a long-term decline, according to the report.

“Although the quarantine of the last two weeks of March froze the property market, the beginning of the year was marked by a particularly strong start: the property market was active, the number of transactions and house prices continued to grow. Due to the increase Relatively fast to house prices, its affordability has declined in many cities across the country, “says Vytenis Šimkus, senior economist at Swedbank.

The capital has a turning point: new apartments sell more than old ones.

According to the economist, before the start of the Vilna quarantine, the property market was particularly active. The start of the year is usually slow, but due to the warm winter and good financial situation, Vilnius residents were especially active in buying apartments in January and February.

“If the property market had not closed during the last two weeks of the quarter, a new record for real estate market activity in the capital is likely to have been achieved,” says V. Šimkus.

This activity was also reflected in prices: housing in Vilnius became more expensive by 12 percent. by year. This was significantly influenced by the changing sales structure, as for the first time since 2008, more new apartments in Vilnius were sold than the old ones.

“After the effects of last year’s tax changes faded, wage growth slowed markedly, but was still strong and exceeded 9 percent. Housing affordability has declined slightly over the years. years, but has remained fairly close to all-time highs. Vilnius’s middle-income household could buy 75 square meters of housing. “says an economist at Swedbank.

In Kaunas, home sales grew 40 percent.

V. Šimkus notes that similar trends were also reported in Kaunas: the housing market in this city was quite active, the number of transactions grew, and new apartments were sold by up to 40 percent. over a year ago

“Housing in Kaunas became more expensive by 12 percent. However, wages grew more slowly than the country’s three metropolitan cities, by about 8 percent. The widest gap between house prices and growth in revenue determined that accessibility was further reduced in Kaunas during the year, but it was still the largest of the three cities. The income received by Kaunas residents allowed them to acquire even 112 square meters. meter housing, “he says the Economist.

Klaipeda’s market is passive

Klaipeda’s real estate market was the least active in the first quarter of the year, almost 15% of transactions were made in this city. less than a year ago

“Housing prices in the port city were less expensive than in other cities, and the price per square meter increased a little less than 5 percent. Meanwhile, wages in Klaipeda grew at a rate similar to that of other places: more than 8 percent. Due to the weaker effect of house price growth in Klaipeda, the country’s only major city, the affordability of housing has increased, “says V. Šimkus.

The home accessibility index calculated by Swedbank in Klaipeda reached 198 points or, in other words, Klaipeda residents earned double the income required to buy an average home.

“Overall, the pandemic at the end of the first quarter of this year did not shake the property market. In April, at the height of quarantine, the number of transactions decreased by about a quarter compared to the same period last year. Still, there are more and more signs that the property market will not be shaken and the recovery will be quite fast ”, V. Šimkus summarizes the trends.

What changes to expect in the real estate market?

Swedbank economists see no significant change or panic when monitoring prices for apartment sales and rental listings. The median home rental price in the capital Vilnius decreased about 7 percent in two months, while in Kaunas and Klaipeda it remained almost unchanged.

“The rental price fell further in Vilnius’s old town, where a significant part of the apartments was for short-term rentals. When the flow of tourists dried up and without expecting a quick recovery, landlords began looking for long-term tenants, so the average rental price decreased approximately 11 percent in two months, “says Nerijus Mačiulis, chief economist at Swedbank.

According to him, the sale prices are still a little more inert, since there are not many sellers who are quick to sell at any price.

“Sales prices fell further in Vilnius Old Town, by about 5 percent. As a result of these changes, rental yields in Vilnius fell to 5.6 percent, the lowest level in almost a decade. This indicator it shows how much of the apartment price the tenant pays per year, ”says N. Mačiulis.

However, Swedbank economists do not anticipate a significant decrease in rental and sale prices, and they see a number of reasons for this.

“The housing affordability index, even with a slight decline, remains near record highs, so buyers who are not afraid of their incomes remain active. The pandemic and temporary economic downturn have also strengthened the power of Buyers bargaining. In addition, many people’s incomes have not decreased, the unemployment rate is no longer rising, and low interest rates and economic stimulus measures will soon heat up the property market as well, “predicts N. Mačiulis.

According to him, large public investments in infrastructure and renovations can lead to construction prices. And people with savings will see even fewer alternatives to spend their money and probably won’t stray from the real estate market.