Latviski English По-русски
Wednesday 26.09.2018 | Name days: Kurts, Knuts, Gundars

Lithuania’s real estate market hints of troubles ahead

(+2 rating, 4 votes)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULinas Jegelevičius for the BNN

Although the new flat sales, including luxury sector, in Lithuanian capital Vilnius continue to hover at the peak of recent years, real estate market outside the capital and Kaunas, the second-largest Lithuanian city, is cooling off, which may be an omen as to what expect soon.

«In 2017, we definitely saw fewer sales in the country’s largest resort Palanga, which is the reflection of health of the market. The buyers were less eager to invest in a second unit of housing (in the resort), a result of apprehensions over the prospects of the short-term future of the market and the economy on the whole,» an real estate broker who spoke on the condition of anonymity told BNN.«What is happening is not seasonal fluctuations but definite signs of a new downturn.»

Lithuania’s real estate market traditionally slowed down in November from October, with the decline reported in all segments. Nevertheless, more real estate units changed hands in November year-on-year, the Centre of Lithuanian Registers reported.

According to preliminary figures, nearly 10,600 buildings, premises and land sites changed hands in sales deals in November, which is a drop by 3.2 percent, from 10,900, in October but a rise by 5.2 percent, from 10,100, in November of 2016.

Although some of the drops can be chalked off to seasonal fluctuations, Tomas Garbaravičius, a member of the Board of Bank of Lithuania, admitted that, in the larger picture, cooling off of market was indeed palpable.

«The prices do not go up rapidly (as they used to in year before) and expectations are lower now. However, real estate market is still hot, mostly due to high acquisitions of secondary accommodations which are used for rent or resale,» he said to Lithuanian media this week.

In his words, expectations of high real estate prices have seen a major blow at the end of the year.

«I’d call it a healthy slowdown, nevertheless. According to the Statistics, the growth of prices during the year’s first and second quarters averaged at 10 percent, which, to be frank, made me uneasy. If it had remained at the level, it would have sent us a distress call, however the rise of prices slowed down,» the Board member accentuated.

He also noted that, in recent 20 years, the pace of flat price growth was just a little slower than that of salaries. The indicator is used by central banks to assess possible risks for an economy.

«In that regard, the situation in Lithuania is pretty good,» Garbaravičius emphasised.

Statistically, Vilnius dwellers allot slightly over 30 per cent of their income to pay mortgage, with the average in Europe being between 15 and 25 per cent.

The Central Bank‘s official also referred to a survey by the Bank, suggesting that more respondents than ever believe that now is a better time to sell lodging than buy it.

«Interestingly, survey participants with higher income tend to think so,» Garbaravičius noted.

Yet the supply of real estate units is vigorous and, importantly, the number of sold flats remains higher than before 2008 downturn.

«In fact, we are seeing a record supply of available flats. If the market remains so vibrant, the supply will likely be absorbed (by the demand),» the banker predicted.

Unlike others, Vilnius inhabitants prefer flats.

The mood of real estate buyers was different in Kaunas, however, where survey respondents believed that the supply of new housing will rise faster than the demand.

In recent years, various Lithuanian regions or cities have been recording significantly different qualitative and quantitative changes in housing supply and demand.

«While some cities see a rapid growth in supply and demand for new housing, other cities show marginal changes or none at all. Analysis of the housing markets of the country’s three major cities also illustrates that they are in totally different stages of development. One reliable housing market indicator can be the development of more expensive housing and, definitely, demand for it,» Raimondas Reginis, senior market analyst of Ober-Haus, a major real estate seller, told BNN.

A survey on expensive housing in Vilnius carried out by Ober-Haus has shown that, in recent years, Vilnius has recorded a stable increase in the demand for the most expensive apartments; i.e. every half-year recorded an increasingly higher number of such property transactions as well as increasing amounts of money spent on the acquisition of such assets.

However, in 2017, Kaunas also recorded a particularly steep rise in the sales of more expensive apartments.

While only 12 such apartments where the price per square metre exceeded 1,800 euro were purchased in Kaunas in 2016, in the first half of 2017, 39 such apartments were purchased.

Meanwhile, Klaipeda, the country’s third-largest city, saw decline in most RE segments in 2017.

The forecast by Sigitas Besagirskas, a prominent Lithuanian economist and President of Vilnius’ Industry and Business Association (VPVA), also bids nothing good as the analyst points to an inevitable descent from the peak.

«The only question is whether it will be soft or hard, as in 2008,» he told BNN. «What we are obviously seeing today is a ballooning bubble in the sector of real estate. Worrisomely, it is clear in Scandinavia, which sets trends for the entire Baltic region, due to the heavy presence of Scandinavian banks in it.»

In an attempt to rein in the bubble, the Scandinavian countries have already limited borrowing and have passed a set of measures in the regard. Swedbank and SEB banks were among the first to do it on their own, in fact.

«We indeed are very reliant on the Nordic countries, not only because of the heavy imprint of Scandinavian capital in the Baltic region, but also owing to the fact that Scandinavia is one of our key export markets.

If the Nordic banks decide to tighten borrowing further, it is inevitable that their Baltic branches will be told to do the same. Should it happen, it would further prompt shrinkage of the local real estate market. As domestic consumption–one of the economy’s key driving forces– reflects what is happening in it, the fallout will be a pace-picking decrease in the demand of goods, and certainly, real estate,» the analyst pointed out.

Speaking of Lithuanian real estate, he observed that house and flat prices were falling, and this is worrisome, although developers and realtors tend to talk about seasonal price corrections.

«As of date, there are quite a few unsold flats in Vilnius. I want to see how sales will be at the turn of the year. And especially in the spring, as they now are, more or less, affected by seasonal (price) fluctuations. If the demand for real estate remains tepid or continues to decrease, developers, distressed by failure to sell new units, and burdened with the obligation to pay back bank loans, will be forced to further slash the prices. With buyers waiting for the lowest price, the market will fall to stagnation. This is the worst scenario and it seems plausible,» Besagirskas predicted.

That the Central Bank of Lithuania has not weighed in on the real estate trends yet, although its governor Vitas Vasiliauskas has hinted at a shaping-up bubble in the real estate market, it is quite understandable, he says.

«The bank, as the banking system’s chief watchdog, does not want to ignite panic with hasty statements. However, it will have to address the issue sooner or later. And furthermore: tighten borrowing and consumption. The situation in Vilnius real estate is no different from that in the other two Baltic capitals, Riga and Tallinn,» the association head said.

In early September, Vitas Vasiliauskas, chairman of the board of the central Bank of Lithuania, said that Lithuania’s economy showed signs of over-heating; however, they were not of the extent they were during the economic boom before the latest financial crisis in 2008-2010.

«Yes, there are signs of overheating; however, they cannot be compared to what they were before the crisis, as the characteristics are different. Crediting is growing at a normal pace, public sector spending is under control, exports markets are indeed stable, changes in the euro exchange rate – they will not have an impact on the main exports market, as it is within the euro area. For now, I do not see reasons to predict a recession,» the bank chief said.

Ref: 020/

Leave a reply

Study: young residents are positive about Latvia’s future

In Baltic International Bank’s Latvian Barometer study, residents were asked about their opinion of the last decade and offer predictions for Latvia’s development in the next decade. Results show that residents view developments in the country based on their interests and competences, focusing more on events and topics important to them.

Security Police: publication of KGB files could put at risk Latvia’s national security

Publication of KGB files «could cause risks for national security,» said Chief of Security Police Normunds Mežviets in an interview to 900 seconds programme of LNT on Wednesday, 26 September.

Total tax debts in Latvia reach EUR 1.13 billion at beginning of September

At the beginning of September, the total tax debts in Latvia, including topical, halted and extended debts accounted for EUR 1.13 billion, which is 6.7% less when compared to August, as reported by State Revenue Service.

Committee: FCMC should be certain of banks’ ability to survive

The objective of the Finance and Capital Market Committee is making certain banks not only promise but also are able to survive in spite of market changes, as reported by chairman of Saeima Public Expenditure and Audit Committee Andris Bērziņš.

Catholic Church of Germany expresses shame for child sexual abuse

The Catholic clergy of Germany has expressed an apology to several thousand victims of sexual assault by clergy and the top cardinal of the German Catholic church stating the perpetrators must be brought to justice.

Latvian minister asks for re-assessment of Rugby Federation head’s competence

Taking into account the publicly reported information that the president of Latvian Rugby Federation Aivars Pilenieks has physically assaulted a player of U-18 team, Education and Science Minister Kārlis Šadurskis has decided to ask the federation to re-assess Pilenieks’ professional competences and compliance with requirements of his post.

Latvian government to expand Money Laundering Prevention Service’s capacity

On Tuesday, 25 September, Latvian government reached an agreement on the need to reorganize the supervision Cabinet of Ministers has over Money Laundering Prevention Service. At the same time, members of the government also agreed to expand the service’s capacity, Finance Minister Dana Reizniece-Ozola told journalists.

New natural gas tariffs approved in Latvia; those who use more gas will pay less

The Public Utilities Commission has approved AS Gaso’s submitted natural gas transmission system’s tariff project, which provides for the introduction of a fixed fee for connection to permitted load regardless of the consumed gas volume.

OCMA: majority of Latvian immigrants live in Britain, Ireland and Germany

The Office for Citizenship and Migration Affairs has calculated the exact number of Latvian citizens living abroad. The majority of Latvians reside in Britain, followed by Ireland, Germany , and USA, according to the data compiled in July 2018.

Sweden's head of government Löfven loses no-confidence vote

The head of Swedish government, Stefan Löfven has not received the support of parliamentary majority despite his left-wing block narrowly winning the parliamentary election earlier in the month.

CC: number of business merges on a rise in Latvia

In the first eight months of 2018, Competition Council made twelve decisions regarding business merges, which is 50% more than the number of similar decisions made in the same period of last year. Consolidation of market participants takes place the most often in retail trade of household goods, BNN was informed by the council.

EU supervisor to investigate Estonian and Danish banking authorities on Danske Bank

The banking supervisory authority of the European Union has been asked to investigate the work of Denmark and Estonia’s national banking watchdogs over possible shortcomings in failing to prevent money laundering through the Estonia branch of Danske Bank.

airBaltic receives its 12th Airbus A220-300 aircraft

Latvian airBaltic airline has received its twelfth Airbus A220-300 aircraft with registration number YL-CSN. The airline plans to have a total of fourteen Airbus A220-300 aircraft by the end of 2018.

In pictures: Pope Francis arrives in Tallinn

The head of the Roman Catholic church has been welcomed in Tallinn as he begins the last leg of the papal visit to the Baltic states devoted to their centenary.

Meteorologists say first autumn storm in Latvia to take place this week

On Tuesday, 25 September, atmospheric pressure in Latvia will increase and clouds will tend to reduce in the afternoon, as reported by Latvia’s Environment, Geology and Meteorology Centre.

Germany's largest bank required to improve fight against money laundering

The financial watchdog of Germany has called on Deutsche Bank to improve its measures against legalisation of dirty money.

Nearly 20,000 Latvians were living in Ireland in spring 2016

19,933 Latvian citizens were living in Ireland in spring 2016, according to census data from Ireland’s Central Statistical Bureau on the number of foreigners living in the country.

Russian protest leader Navalny detained right after previous detention

Alexei Navalny, a supporter of current protests in Russia against pension reform, has been released from administrative arrest, but arrested again on the same day to be kept in administrative arrest for another 20 days on charges of holding an illegal protest.

CPB: Russian special services remain highly interested about Latvia

Russian special services remain highly interested about Latvia’s internal politics. This includes 13th Saeima elections and their possible results. However, there is currently no information to suggest the election process could be influenced from the outside, admits Constitution Protection Bureau.

PHOTO: Pope Francis visits Riga Cathedral and meets seniors at St Jacob’s Cathedral

Pope Francis visited both Riga Castle and Riga Cathedral, where a service was held under his supervision. There he met with different Latvian officials. After that, the pope met with senior citizens at St Jacob’s cathedral.

Pope Francis arrives in Latvia for an official visit

Pope Francis arrived in Latvia on Monday, 24 September. He was greeted at the airport by President Raimonds Vējonis, Archbishop Zbigņevs Stankevičs and other public figures.

Week in Lithuania. President proposes amendments to restrict bailiffs' remuneration

Lithuanian President Dalia Grybauskaitė is putting forward amendments aimed at restricting bailiffs' financial remuneration to up to 15 per cent of the amount recovered.

BNN summary of the week: pre-election heat, rule of law in Latvia, Baltics prepare for Pope’s visit

BNN offers a summary of this week’s topical news in a variety of categories: Elections; Change; Stagnation; Fight; Visit; Investigation.

Court reschedules viewing of criminal case due to Non-citizens Congress leader’s poor health

Riga City Vidzeme Suburb Court announced today that the viewing of the criminal case in which leader of Non-citizens Congress Aleksandrs Gapoņenko is accused of inciting national hate will be postponed to a later date.

Producer prices in industry up 1.0% in Latvia in August

Compared to July, level of producer prices in the Latvian industry rose by 1.0 % in August 2018. Level of prices of products sold on the domestic market grew by 1.9 %, but of exported products – went up by 0.1 %.