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At the Seimas Budget and Finance Committee, Jokūbas Markevičius, Director of LB’s Financial Stability Department, said that at the beginning of the year home purchases increased in the capital’s primary market: records were recorded in March and April.
According to him, there are several reasons for this: the spring effect after the quarantine, the accumulated deposits in the accounts, the faster savings in the initial contribution, the effect of launching attractive homes on the market, the increase in wages, etc.
In the primary housing market, in the words of the LAC representative, a short-term “bottleneck” is forming as supply begins to lag behind demand. This is considered a short-term situation.
More and more houses are bought from plans, it is not ruled out that there is speculation in the reserves. Several apartments are being reserved so that they can be resold later if prices go higher. This could be measured by introducing mandatory registration of pre-contracts. Such changes would make it easier to understand how many purchases are being made and how much speculation is taking place.
In mid-2020, the construction of housing projects began to increase, in early 2021 construction began to increase. Expansion and construction of houses away from the city center.
Since 2015, traditionally € 1 billion in loans have been made, more recently around 1.5 billion. The proportion of homes purchased with a loan decreased in 2020, most of which are purchased with own funds.
It is estimated that a fifth of transactions are made when people who already have a home buy one.
As for prices, they are constantly going up. Before the pandemic, the annual change in price was 6-7%, now an acceleration is visible. According to the latest data, the annual growth is 9.5 percent. The rise in prices is due to strong demand and unpredictable supply. A similar acceleration is observed in many EU countries.
Building materials became more expensive: wood, steel, reinforcement. Such an increase may be temporary, but it puts upward pressure on prices. However, LAC calculations show that real estate prices are what they should be, in contrast to 2006-2008.
There are many languages on the market that lack apartments which make the prices huge. However, information from LB shows that prices in Vilnius grew more in the central part of the city. In other districts, growth was steady. In public space, a lot of attention is paid to the most luxurious apartments, the offer of which has increased, in that segment the prices have really increased significantly. The general situation remains stable.
LB Director Gediminas Šimkus commented that the market is really hot, which requires constant monitoring and raises concerns. Especially most of the houses in Lithuania are not acquired through loans. The possibility of real estate taxation was considered a few years ago, it is important that if a real estate bubble forms, it can be managed.
Seimas member Vytautas Gapšys commented that first and tenth house buyers are also mixed in the statistics. Building material prices are expected to rise everywhere, not just in the central part of the capital, and it is feared that disadvantaged families will not be able to afford their first homes.
It is suggested that you ask the government to respond if you are considering a property tax. “If we don’t put our foot on the brake, we will no longer control the situation,” says a member of Seimas.
G. Šimkus considered that the growth of the prices of raw materials in the regions should not be a problem, because there are few new housing projects here. However, if housing becomes more expensive in the capital, it will become more expensive in the regions, especially in tourist complexes where there is a shortage of supply.
It was still debated in 2019 that it would be nice to be able to apply the property tax, as this is one of the most effective means of curbing the turmoil in the property market.
Deputy Finance Minister Rūta Bilkštytė responded that the Finance Ministry has committed to submitting a project on a new real estate tax model in the direction of income inequality.
