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After the announcement of the quarantine in Lithuania, the sale of residential real estate fell to unprecedented levels. Real estate experts were reluctant to predict the future, but agreed that the market was stagnant. It is true that with the decrease in coronavirus cases in the country, real estate developers expected sales to grow in May.
According to Inreal Group data, 93 apartments in Vilnius were sold in May, 14 more apartments than in April, but the number of canceled transactions (canceled purchases) also increased. In April, 28 apartment purchase transactions were completed (calculating the total sales of each project, that is, if 3 apartments were sold and 4 were canceled, it is calculated that one apartment was abandoned from the project), and in May, up to 45 Kaunas sold and canceled an equal number of apartments. 18. The number of new deals increased compared to April, with the total number of sales falling in principle for one project. In Klaipeda, as in the previous month, there are no cancellations, 13 new agreements were carried out.
Discounts and promotions have been in effect for some time.
Since the start of the quarantine, the developers said they have not yet considered price reduction. According to analysts, the prices of new homes have not really fallen, but it has been noted for some time that real estate companies have started to apply various types of discounts and promotions to attract a buyer. Arnoldas Antanavičius, head of Realdata, real estate analyst Delphi for housing he says for a while noting that some developers are offering discounts and promotions. Such actions were also observed before quarantine.
“I have been monitoring the stock history since 2016–2017, I follow the statistics, how many projects are being proposed, what stocks, how they are changing, whether they are strengthening or weakening. There were periods when sales were really stagnant, then, one month, the developers offered a campaign, the following month, an additional one, so they intensified to attract buyers, “says A. Antanavičius.
According to the real estate analyst, a developer promotion or discount is the first step in lowering prices. Real estate companies, according to the interlocutor, are particularly reluctant to reduce house prices, as this can show that the company is going through difficult times and informs the market: prices may still fall. So, buyers start to expect a drop in prices, wait, don’t buy, and the market stops.
“Therefore, the most common attempt is to attract the buyer with gifts that are also basically associated with a lower price, such as a parking space, decoration, appliances, etc. This is a gift of at least € 2,000, a hidden discount. Hidden discounts cannot be called price reductions, therefore the price statistics do not reflect this, and it seems that the market maintains that previous expiration ”, explains A. Antanavičius.
It is important that the project is completed
During quarantine, real estate stocks and discounts were noted to increase. Admittedly, according to real estate analyst A. Antanavičius, developers were in no rush to take additional steps to attract buyers, and the discounts now being announced aren’t as drastic. However, the real estate analyst draws attention to real estate objects that are subject to a discount. According to him, these may be homes that were reserved in the first months of this year, but as the population’s financial situation deteriorated, the reserves were canceled.
“Recently, in terms of shares, the apartment booking fee has been reduced, for example, you can book an apartment for 500-2000 euros. It was one of the most popular stocks, but it is not really a great action for the buyer It is more of a relief and the developers, having the capital, did not feel the pressure of higher income and therefore allowed the reservation for a minimal fee, which the buyers took advantage of. It seemed that everything was fine, the market started to getting even hotter, we saw record numbers, but now, at the end of the quarantine, several of these real estate items are being returned. I suspect that those apartments were initially booked for a low price, and then the booking was canceled because there was an expectation that prices could decrease in the future or doubts about their financial possibilities began “, considers A. Antanavičius.
The interviewee clarifies that it must be taken into account if the discounted apartment for sale is already in the complete apartment building. The developer may be low on funds, so he is in a hurry to sell certain apartments, and here buyers risk that the real estate they have purchased will not be built or the completion of their construction will be delayed if the developer suffers more financial difficulties.
“If a developer faces financial difficulties, and would see such developers, for example, if they have many early-stage projects, many giveaway sales, in some cases there were preferential reserves, they did not divide their businesses, they have no alternative income from renting commercial premises more or less”. As a way to compensate for that lack of money, I see considerable risk, because those projects take a year or a half to implement, and a lot can happen during that period. People may lose their jobs, bank financing may change, it may become more expensive, it may be impossible to borrow, “adds the real estate analyst.
There are offers that have never been seen before.
According to A. Antanavičius, currently in the real estate market we can see not only discounts, but also various promotions and attractive offers for buyers. As already mentioned, one of the most common measures is a direct discount of various sizes for an apartment or several apartments, in terms of one or even several projects proposed by the developer. People are also drawn to the gifts: parking space, storage room, basement, terrace, apartment decoration or even pre-made swimming pools. According to A. Antanavičius, when everyone experiences this economic stagnation, developers have taken steps that have not been used before, for example, offering to repay a bank loan if the buyer’s financial situation deteriorates, adjusting the price of the purchased home if the Average property prices in Lithuania fall.
“One developer has offered an even more interesting option: they ‘link’ the price of the apartment to the price index of the company ‘Ober-Haus’ and, after signing the reservation agreement, the project is implemented. When the transaction needs to be completed , if the Ober-Haus price index has fallen, the price of that apartment will be indexed accordingly. It cannot go up, but if the prices fall in the market, the buyer is guaranteed safety. But the Ober-Haus average It is the average of the entire market, not necessarily the prices of the apartments of that project, but there is a psychological moment, “says the interlocutor.
According to A. Antanavičius, promotions and discounts are made by looking at how many apartments have been sold, how many are planning to sell, how many reservations have been canceled and by comparing the set and the objectives received.
“If there is a significant delay behind the plan, then something must be done,” emphasizes the real estate analyst.
What risks does the buyer face?
According to A. Antanavičius, the acquisition of homes by leasing can also be attributed to the shares applied to the real estate. Although leasing was popular even before quarantine, according to A. Antanavičius, the developer, who offers to acquire real estate in this way, has increased the supply of apartments available for lease.
“Currently, the company announces that it is increasing the supply of leased apartments, previously there were only a few projects and only a few apartments with windows facing the street or the like. Now there are no changes in quality, less liquid apartments are still offered. , but there are more of them, the choice is bigger ”, explains the interlocutor.
According to A. Antanavičius, the risk that the buyer faces when buying a house at a discount or a stock is mainly related to the developer’s ability to complete the project, therefore, before attracting a stock or a discount, one should look closer to the project developer.
“You have to pay attention to the financial situation of the developer, if it is reliable, how experienced it is or if it has survived more crises.” Because developers who survived the previous crisis and those who grew up during the current boom have different views on business development, risk taking, risk management and have a completely different degree of risk, “said the interlocutor, adding that it is necessary to assess the status of the project, whether or not, and its ability not only today, but also in a few years to pay the loan to the bank.
Another risk when buying a house at a discount may be related to the location of the apartment itself: if it is not near a busy street or if there is not much noise, pollution, etc. through the windows. According to the real estate analyst, these apartments are generally not very attractive, so developers take additional incentives. On the other hand, the analyst emphasizes that promotions and discounts can also be a great opportunity for a buyer to buy their dream home if the risks listed above do not materialize and such real estate is not purchased from the lottery, but is already built.
Promotions and discounts are necessary today
Mindaugas Statulevičius, head of the Lithuanian Real Estate Development Association, also states that he notes that developers are increasingly offering additional incentives to buyers. According to him, discounts and promotions generally apply to those apartments that want to sell faster: when the project has already been completed, but only a few unsold houses remain, or when you want to encourage a new project that would be for sale.
“Or for those apartments that have certain restrictions, such as less sunlight entering the facilities, the apartment is not assigned a parking space or the like. Then we try to figure it out so he doesn’t stay, ”adds M. Statulevičius.
Today, according to the interlocutor, promotions and discounts are needed for each real estate company for different reasons: “One may need to accelerate the flow of money, stimulate the flow, allow him to apply discounts or the like. I see that the number of cases of this type is increasing, in part it is probably contagious, because when you start doing it, other buyers also request various discounts, some of them react to it, ”says the real estate expert.
Choose a different direction
Delphi House Several developers asked why they apply certain discounts or not. Real estate development company Galio Group, which does not apply cash discounts during this period, emphasizes that the company has not completed residential projects in its portfolio, therefore, has not accumulated an unsold apartment warehouse.
Pilaitė
“We are currently implementing two residential apartment projects, construction is scheduled to be completed in the middle or second half of 2021, therefore we do not apply direct discounts to real estate. However, we offer buyers flexible purchasing conditions: We apply the possibility of dividing the initial contribution until the end of construction. We are also in the list of trusted bank builders, which guarantees that buyers who are willing and able to buy a home with a loan will receive credit for the home in our projects when they reach 80% instead of 100% completeness.
Robertas Žulpa, representative of the Galio Group and director of Galio Development, says that due to the pandemic and quarantine, the sale of new apartments has almost stopped, which means a decrease in the income of real estate developers, so Therefore, according to him, buyers must be very careful during this indefinite period. be immediately tempted by significant home discounts that stand out significantly from the context of discounts or promotions applied by other market participants.
“There are between 70 and 80 real estate builders in the real estate market, of which the big builders, who have a solid financial base and can easily complete their construction projects, even if those apartments have not been purchased, represent around 10 -20% all markets The rest of the builders are market players or market participants with little experience in this business, often such builders have not diversified their activities and all their income comes from the sale of homes. Such builders often work heavily on debt, and the source of financing is often not a bank but crowdfunding instruments or debt securities, indicating that the banks did not want to take the project’s risk, “says the interlocutor, and He adds that less experienced and financially weak real estate developers can start applying big discounts on homes.
According to R. Žulpa, the economic situation is still very uncertain, market participants are reluctant to make “sudden movements”, so only after a few months we will see the consequences of the quarantine: buyers should simply be more vigilant than habitual.
Kristina Karbauskaitė, sales manager for real estate company Omberg, which currently offers various discounts and promotions to potential buyers, says that the company has begun to apply additional measures to some projects to sell the latest homes.
“In the” 24-story “and” 34-story “projects, the last cottages remain. We decided to apply discounts to them: we want to help the settlement communities to form themselves to the fullest,” says the interlocutor.
The company also applies more promotions: it offers a discount of 3,500 to 4,500 euros for certain objects, and announces that it is donating wooden terraces, wardrobes and even pre-made swimming pools, etc. K. Karbauskaitė says this is how the company applies the “all inclusive” concept.
“Some apartments have windows to three countries around the world, others have separate closets or very spacious living rooms. These benefits are complemented by various package and value-added offers in all periods since the start of the project, such as special discounts additional (for example, during open days), donated reclaimer or terrace for the residents of the first floor, community leisure equipment of the project: bicycles, scooters, Nordic walking sticks, etc. ”, comments the interlocutor.
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