Expert sends a message to those waiting for real estate prices to fall: the probability that housing prices will fall close to zero

Predicts no fall in prices

Despite the fact that the availability of housing is decreasing, its prices should not decrease as a result, predicts Mindaugas Statulevičius, the head of the Real Estate Development Association. He notes that the rapid rise in house prices in recent years has led to past housing challenges for the population, as the supply of real estate in metropolitan areas has even declined at the time.

As the number of new housing constructions will not grow very fast, production costs will only rise, the shortage of labor will remain significant, according to the head of the Real Estate Development Association, the rising prices of loans will not slow down.

“Developers operate in a competitive environment, they compete with each other a lot. So is the price. But so far, there are certainly no preconditions for reducing the price just because the time for higher interest rates is coming. That sharp rise in mortgage rates is not so significant and it is not affecting the entire market. Only a part of people who buy with a loan work, “M. Statulevičius assured.


© DELFI / Julius Kalinskas

Martynas Žibūda, Deputy General Director of the real estate company Eika, also confirmed that there is no possibility for housing prices to fall. According to him, a price adjustment could take place unless supply increases significantly.

“The key message for buyers who follow the news is that the chances of housing prices falling are close to zero. Housing prices may stop growing, their growth may slow down, because there will be no more high demand, there will be a little more vacant housing, but until the delivery of apartments, I see no reason to fall in price, no one will build, because today we have to build what has already been sold. ” , – emphasizes the interlocutor.

To build more housing, according to the expert, is hampered by bureaucracy.

“Changes in interest rates address demand issues. If we completely reduce or kill people’s desire to buy, then in a way we formally solve and balance the market, but the problem is bureaucracy, that it is practically impossible to get a building permit in Vilnius. Of course, the reasons why it is so difficult to get a building permit are positive: it requires better project quality, finding the best project solution, etc., but there is no real supply. And the number of people in Vilnius is growing, due to the war both Russians, Belarusians and Ukrainians came to us, everyone needs to live somewhere, ”the interlocutor notes.

Martynas Žibūda

Martynas Žibūda

© DELFI / Karolina Pansevič

M. Žibūda says that some of the businesses whose owners are now looking for housing for their employees have moved to Lithuania. Looking for a few dozen apartments to buy or rent, but developers have nothing to offer.

“We are waiting for at least a year or more before we have new offers. Vilnius is growing, the rental market is growing, prices in the rental market have been growing by about a third, and the opportunities for Vilnius residents to buy and rent a home have decreased. There is a danger that we will not attract business, investment due to such technical things. Developers are ready to build, but we are not able to get permits and even meet that reduced demand, ”says the real estate expert.

In May, house prices rose by 1.7 percent.

The value of the Ober-Haus Lithuanian Apartment Price Index (OHBI), which records changes in apartment prices in the five largest Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 1.7% in May 2022. (1.6% growth was recorded in April 2022). The general level of apartment prices in Lithuanian cities has grown by 20.1% over the last 12 months. (In April 2022, annual growth reached 21.4 percent).

In May 2022, apartment sales prices in the country’s capital grew by 1.5 percent. and the average price per square meter reached 2,229 Eur (+34 Eur / m²). In Kaunas, Klaipėda, Šiauliai and Panevėžys, 1.9 per cent were recorded in May, respectively. , 1.0 percent , 3.8 percent. and 3.6 percent. The growth of apartment prices and the average price per square meter rose to 1,559 Eur (+29 Eur / m²), 1,460 Eur (+14 Eur / m²), 1,018 Eur (+37 Eur / m²) and 954 Eur (+35 Eur / m²), respectively. .

Buying a home

Buying a home

Over the year (May 2022, compared to May 2021), apartment prices grew in all major cities of the country: in Vilnius – by 21.7 per cent. , Kaunas – 21.3 percent. , In Klaipeda – 15.0 percent. , In Šiauliai – 18.6 percent. and in Panevėžys – 16.2 percent. .

Despite the uncertainties in the global geopolitical and economic situation, the growth of apartment prices in Lithuanian cities in April and May of this year was still high (monthly growth of 1.6% and 1.7%, respectively). It should be noted that such a rather rapid rise in prices took place against the background of a clear decline in sales of apartments. For example, in the capital Vilnius in 2022. In May, apartments were sold for 12 percent. less than in April and even 39 percent. percent less than in May last year.

“Thus, the housing market is currently in a zone of some turbulence, when even with a decrease in the number of transactions, there is still a significant rise in prices. The explanation for this phenomenon is that although the demand for housing has declined, the decline in housing supply is even more pronounced. Rising prices for construction materials, labor shortages, cracked supply chains and a number of developers are holding back new projects, similar to the pandemic in 2020, while the choice of apartments in multi-apartment projects already under construction or nearing completion is historically extremely low. Some developers are also slowing down sales, so the imbalance between supply and demand in the apartment market persists and may even grow. For example, if large capital were to enter the housing market in order to buy more apartments for rent, ”the Ober-Haus report said.

It continues that the situation in the market will not change in the coming months, even against the background of rising loan interest rates, the planned global real estate tax and geopolitical threats.

“However, it should be noted that as the current rise in prices is not due to healthy growing demand but to the extremely poor supply of housing, such rising prices are already less sustainable and may act as a brake on new growth in housing demand in the future,” says Ober. -Haus.

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