More and more houses are bought, but the real estate analyst warns: it is too early to talk about a market recovery

The curve goes up

For a time, the housing market was completely crushed. However, since May, according to statistics, the real estate sales curve is increasing. Real estate analysts presented the July results, which show that residents are not only looking for housing, but also booking it, buying it.

The data collected by the real estate services company Ober-Haus show that the recovery of the real estate market is especially observed in the capital of the country, which is characterized by the greater volume of new housing construction and a sufficient data sample to see clearly general trends in this segment. Meanwhile, in Kaunas and Klaipėda, due to much smaller volumes of new construction compared to the capital, greater fluctuations in sales are observed during a month, but the general trends are also clear: sales volumes are growing, he announces the Ober-Haus New Housing Market Survey.

“The increasing sales volumes of new apartments coincide with the significantly improved expectations of the country’s population regarding the personal economic and financial situation of the country in recent months,” says Raimondas Reginis, Head of Market Research for the Baltic States at Ober-Haus.

The report goes on to say that according to Statistics Lithuania, the consumer confidence indicator has been growing for three months in a row. The indicator of consumer confidence in the country has increased by 13 percentage points in the last three months: from minus 16 in April this year to minus 3 in July this year. In July 2020, this indicator increased by 1 percentage point.

According to Ober-Haus, in July this year, the total balance of sales (the difference between the number of newly concluded and terminated deals) in the primary market for Vilnius apartment buildings, including apartments sold and reserved in apartments already built and under construction, it amounted to 335 apartments or 30%. more compared to June 2020.

When looking at the sales of new apartments in April (48 departments), May (132 departments), June (258 departments) and July (335 departments) this year, it is observed that the recovery of activity in the capital of the country is consistent , i. and. sales volumes increase significantly every month.

“It is true that comparing the sales of new apartments in July of this year with the monthly average of the first quarter of this year, we see that the result for July is still 27 percent. smaller, “says R. Reginis.

The secondary real estate market is also expected to increase

Recent data shows that not only new construction, but also the secondary housing market is on the mend after a particularly ineffective second quarter this year. Similar trends are observed not only in Vilnius, Kaunas or Klaipeda, but also in other regions of the country. According to R. Reginis, official data for July is likely to show growing apartment sales across the country.

“Already more active buyers of new apartments can encourage apartment developers to resume implementation of previously planned projects, which we have seen in recent months in both Vilnius and Kaunas. Of course, developers will be extremely cautious for now as they will want to ensure that the current recovery in the housing market is sustainable and that their investments hit the market at the right time. On the one hand, developers are clearly seeing a recovering market, but at the same time, the number of coronavirus infections is increasing once again and there is more and more talk of the second wave of the pandemic. Therefore, developers currently have to make difficult decisions: whether to take advantage of the improvement in the situation in the housing market and try to gain a competitive advantage by presenting a new product to potential buyers, or not to take too many risks and wait until autumn, when the general situation in Lithuania and the rest of the world will become clearer, ”says R. Reginis.

It’s too early to say the market has recovered

Tomas Sovijus Kvainickas, Head of Investment and Analysis at Inreal Group, also says that the real estate market is moving forward, but it is too early to talk about its full recovery.

“It is not yet possible to say with certainty that the primary housing market has recovered. The three main Lithuanian cities are following a different rhythm than the quarantine. The best growth results are recorded in Vilnius, the city of Kaunas cannot yet gain momentum and the market for new apartments in the port city is small, making it difficult to assess the results of the changes unambiguously. On the other hand, there is more and more optimism in the market, despite the potential threat of the second wave of the pandemic and the situation in the main countries of the world ”, points out the real estate analyst.

It goes on to say that 335 apartments were sold in the capital in July 2020 (364 sales, 29 cancellations), i. a quarter more than in June (290 sales, 28 cancellations) and 4-5 times more than during the quarantine in April and May. While sales are around 20 percent. lower than in July 2019, but such a monthly result, maintained until the end of the year, would allow to achieve annual sales of almost 4,000 apartments in 2020, which has been the norm in Vilnius for a long time.

“On the other hand, it is not clear how the market will recover and what number will become the new ‘benchmark’ for monthly sales. There is no increase in supply in Vilnius in July, so the warehouse of unsold homes fell to 4,881 apartments. This siege of real estate developers should be associated with a pandemic, “says T. Kvainickas, adding that real estate development is an inert process, whose changes lag behind the pace of sales by several months. It is likely that new housing projects, which were due to start in the middle of the year, could enter the market by the end of the year if the economic situation in the country does not deteriorate again due to the pandemic. The liquidity index in Vilnius increased from 1.19 in June to 1.13 in July, but so far it is still weaker than in the same period last year (1.06).

In the regions, buyers are still calm.

According to the real estate analyst, the recovery of the primary housing market in the city of Kaunas remains difficult. 49 total sales in June were replaced by just 27 total sales in July this year (37 sales, 10 cancellations). This result is 2 times worse than last month and five times, compared to the same period last year.

“The prolonged stagnation of sales also has a negative effect on the liquidity ratio in Kaunas. A year ago, the figure was 1.10, last month it was 1.22, now it is 1.45. July 2019 record (index is based on 12-month sales) also had the biggest impact on the deterioration of the index, when more apartments (153) were sold per month than this year since the quarantine began. registers the increase in supply in July in the temporary capital ”, calculates T. Kvainickas.

It continues that in Klaipeda during the quarantine period, sales cancellations were largely avoided, but during July the purchase of 8 new apartments was rejected. After agreeing on 19 new purchases, the total result was 11. A similar result was registered a year ago, when 12 apartments were sold, but in June of this year 17 apartments were sold (in total), so the sales of this month are a third less.

“Due to uneven sales, the liquidity ratio in Klaipeda is constantly fluctuating and is currently at 1.42. Compared to June, the index value has decreased (1.36), but better than in July 2019 (1.60). At the end of June-July, 28 new economy class apartments were offered to the market in the eastern part of Klaipėda, ”says the real estate analyst.

The Ober-Haus report states that after a significant and sudden jump in sales volumes in Kaunas in June this year, sales in this city stabilized in July. According to Ober-Haus, in July this year, the total balance of sales in the primary market of Kaunas apartment buildings, including apartments sold and reserved in already built and under construction apartment buildings, amounted to 56 apartments or 5 %. less compared to June 2020. If in the first quarter of 2020, on average, 68 new apartments were sold in the Kaunas primary market per month, then the result for July this year is still 17 percent. lower.

Meanwhile, in Klaipėda, after a relatively poor result in June this year, in July this year, the sales volumes of new apartments increased significantly. According to Ober-Haus, in July this year, the total balance of sales in the primary market of Klaipėda apartment buildings, including apartments sold and reserved in apartments already built and under construction, amounted to 35 apartments or 1.8 times more than in June 2020. Comparing the sales of new apartments in July this year with the monthly average of the first quarter of this year, we see that the July result in Klaipeda is 9 percent. lower.

Officially registered housing is growing

Analyzing the data of registered real estate transactions, the Records Center observes that the total number of registered transactions in July was already higher not only in the previous month, but also compared to the same month of the previous year. Although this year’s overall result is still behind last year’s January-July in fixed numbers, that gap is narrowing every month.

“During July, more than 12 thousand people were registered throughout the country. Real estate transactions. This figure is almost one fifth higher than the result recorded in June this year and almost one tenth higher than July 2019. It can be said that the market has gradually returned to normal, says Paulius Rudzkis, Acting Head of the Department of Analysis and Data Solutions of the Records Center. “However, the fixed decrease in the number of transactions recorded during the quarantine period means that the overall result for this year is still lower than in the corresponding period last year.”