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Ordinary record of apartment sales in Vilnius
“The situation in the Vilnius housing market continues to heat up, although the average house price grew by only 6%, average construction prices have dragged down the average, reflecting last year’s prices in instead this year due to the popularity of preliminary contracts, “says Swedbank Senior Economist Vytenis Šimkus.
According to him, the secondary market prices and the Bank of Lithuania’s repeat transactions index show that real housing in Vilnius is currently 13 to 16 percent. more expensive than a year ago.
Average home affordability in Vilnius improved slightly due to lower interest rates and 11.5 percent. Swedbank economists are counting on salary growth. However, with more timely sales of older homes, home affordability deteriorated, although it remained relatively high.
“Demand for housing in Vilnius remains relentless: 3,877 transactions were concluded in the second quarter of this year, but this number is likely to be significantly higher, as preliminary contracts are not yet reflected in the Statistics Center of Records” . The high demand is strongly influenced by the growing income of the population, the desire to improve the quality of housing and the growing population. Furthermore, the growing popularity of investment transactions is also heating up the market, ”says V. Šimkus.
He notes that real estate developers are trying to meet the growing demand. The construction of some 5,000 homes began in the first half of this year, and if this rate of construction continues, the situation in the housing market should return to normal in the long term.
The most affordable housing remains in Klaipeda
“Sales trends in Kaunas and Klaipeda in the second quarter of this year were very similar. Housing markets here were very active, with sales of older homes growing much faster in both cities, indicating a shortage of new homes. The average square of the house. subway. The price in Kaunas and Klaipėda grew by 18.5 and 8.9 percent, respectively, ”says V. Šimkus.
In Kaunas, wage growth reached almost 14%, but it still failed to catch up with rising house prices. Therefore, according to the Swedbank economists, affordability in Kaunas declined, although it remained very high. The average family in Kaunas could buy 34 m2. subway. housing larger than in Vilnius, where an average of 79 square meters. subway. housing area.
Meanwhile, in Klaipeda, wage growth has not lagged behind house prices and housing affordability has barely deteriorated. In Klaipeda, housing is the most affordable of all the major cities in the country, but it is determined by the weaker economic and demographic situation in the port city, and not by the large supply of housing, ”says V. Šimkus.
The housing market is also heating up in neighboring countries
Swedbank economists note that the housing market trends in Riga and Tallinn were very similar to those in Vilnius. The rapid economic recovery boosted personal income, with a marked activation of the primary market.
“In Tallinn, as in Vilnius, the number of preliminary contracts signed is increasing due to delays in supply, so the official data does not fully reflect the growth in real prices. Housing in the Estonian capital is likely to grow faster than income, and some of the money withdrawn from pension funds is likely to flow into the housing market, ”says a senior economist at Swedbank.
According to him, Riga, meanwhile, is undergoing a gradual transformation of the market from Soviet construction to newly built apartments, which will reduce the affordability of housing in Riga in the long run.
As evidenced by the decline in rental yields
Rental income calculated by Swedbank, which shows the share of its annual rental income in house prices, continued to decline in all major Lithuanian cities.
According to Swedbank chief economist Nerijus Mačiulis, currently total rental income in Vilnius has decreased to 5.5 percent, and in Kaunas and Klaipeda, to around 6.5 percent.
“In Vilnius, home rental yield has fallen to the lowest level since 2012, and in Kaunas, to the lowest level since 2014. This means that house price growth has lagged behind and started to outpace. the growth in rental prices, which was much more moderate and reflected the real demand for housing, ”says N. Mačiulis.
The average rental price in Vilnius and Kaunas increased by about a tenth during the year, and in Klaipėda, only a small percentage. According to N. Mačiulis, these trends in rental prices correlate with both economic activity and demographic trends.
“In recent years, the population of Vilnius has increased by around 8 thousand per year, in Kaunas by around 3 thousand, and in Klaipėda the population remains stable. In our opinion, demographic trends in major cities will remain favorable and will continue to stimulate demand for housing, ”predicts Swedbank’s chief economist.
He points out that the average interest rate on home loans in Estonia and Lithuania fell to 2.4 percent, and in Latvia, to 2.6 percent.
“At the moment, it is unlikely that the ECB will be able to raise the key interest rate in the next two years, and Euribor futures show that, in general, positive interbank interest rates are not expected for at least the next five years. “. However, accelerating inflation can adjust these expectations and the ECB’s plans, so the zero interest era should never be expected to end when long-term financial commitments are made, ”says N. Mačiulis.
