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Lithuania’s litas-to-euro swap has not altered real estate prices

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Vilnius

Linas Jegelevičius for the BNN

Unlike in Estonia and Latvia, Lithuania’s euro adoption has not slowed down real estate market in the country. The pre-euro forecasts of a more tepid realty market have proven to be inaccurate mostly.

«I really cannot tell that there’s any slowdown in the market after the changeover. People out there just might seem more curious for a while, trying to sniff out what is going with the euro real estate market and what direction it can take,» Rimas Kirdulis, director of Lithuania’s Real Estate Agency Association (LREAA), told BNN.

Predictions were wrong

Ahead of the milestone currency swap, Lithuanian real estate experts were eagerly eyeing the other two Baltic States’ post-euro real estate sector and trying to work out a similar pattern of development for the euro-embracing Lithuania.

«From the experience of the countries with the euro, the market becomes sluggish in the aftermath for a while. It would be accurate to tell that after the adoption, people try to get adapted to the new currency and shun for some time to get engaged in real estate deals that usually require lots of money,» Saulius Vagonis said before the euro adoption.

Estonia, for example, has seen a 2 percent dip in real estate sales in the wake of the currency change in 2011. But the market did bounce back remarkably in 2012, when the real estate deals soared 23 percent against the previous year.

Meanwhile, Latvia reported a slower growth of the market following the euro kick-off. After seeing a 23 percent rise in 2012, 17 percent surge in 2013, year-on-year, the sales were quite slow in 2014, with the euro in place, when the annual real estate market’s growth accounted for 5 percent.

Kirdulis, of the LREAA, says there were particularly many predictions that, in the overwhelming «rounding-up» the prices, the property rent costs will be going up. But this did not happen to the surprise of the realtor.

«In fact, they remained at last year’s level, which could be probably explained by the fact that in anticipation of the euro adoption many Vilnius residents had bought up a lot of real estate, usually from their savings, without a bank loan. That, in fact, has hiked the rental residence supply in the Lithuanian capital Vilnius, which is why the lease is of the last year’s level», explained the association head.

Lithuanians frown at high-rises

Kirdulis predicts though that the rent in the capital will start inching up throughout the year later and that should eventually twitch up the real estate prices.

Speaking of general market trends, the LREAA director noted that Lithuanians dwelling in the largest cities have notably got fed up with Lithuanian-size residential high-rises and tend to seek now their own place in quiet residential neighborhoods or, those who can afford it, build their own house on the outskirts of the city.

«The wave of whims to acquire accommodation in a glassy glossy towering high-rise, a trend quite palpable during the peak of economy, has definitely fizzled out. Potential real estate buyers are against skyscraper builders today – many do believe that the climate we have –often frigid winters and scorching summers- aren’t compatible with the construction features of the high-rises – large areas of glass, air-conditioning in question and high heating bills, a major issue for most Lithuanians,» said the expert.

Over the last five years, he insisted, there has been a deepening trend of moving out from Vilnius to the city vicinities, where many took on building their own house. A relatively small one and, as a rule, energy-saving oriented.

«Expansion-wise, there are still pretty much large land areas at the entrance to the capital where they can be used for building new residential property. Interestingly, in terms of generation, both seniors and youth often prefer living outside the city. This is definitely the most noteworthy trend in Vilnius,» Kirdulis said.

Currency swap had no effect on Klaipėda RE

Danas Kasperavičius, a real estate broker at Dnb Bank-owned real estate company Dnbbustas, says the euro adoption has been smooth and shake up-free to the real estate market in the Lithuanian seaport of Klaipėda.

«With three weeks into the new year, all has gotten back in track. After the real estate price rise last April many mulled that the new upward price shake-up should be expected ahead of the euro adoption, especially before Christmas, but it proved not to be the case,» Kasperavičius told BNN.

Still, taking the last half-year of 2014, the sales curve went up in December.

As many of his counterparts, the broker admitted he was expecting certain calm in the market for some time in the new year, a result of the currency changeover.

«But quite surprisingly, the slowdown, as a matter of fact, never ensued. In fact, right after the holidays people started calling and inquiring about the real estate we sell,» the Dnbbustas broker said.

Price-wise, contrary to the widespread speculations that the euro will jiggle the RE prices upward, it, in fact, was jerking them down, he noted.

Speaking of the larger picture in the Klaipėda real estate market, 90 percent of all deals are on residential apartments.

«Especially, there’s much exuberance as a rule in the new residential property segment. But, notably, all of it, particularly with a good, picturesque view below the upper range of price has been sold out. If one sought to buy for a moderate price a fifth-floor apartment from which window the view would not be obstructed by other ,towering apartment blocks nearby, that would perhaps be impossible now,» the broker noted.

Real property over EUR 100,000 stands little chance

Meanwhile, in the house market, Kasperavičius said that houses up to EUR 87,000 stand the best chance to find a new owner in the Lithuanian seaport.

«Frankly, I get just very few calls inquiring about houses on sale over the price-tag. Quite recently, I’ve sold a house with a partly finish for EUR 72,000, and it took a single day to wrap up the deal,» the broker said. He added: «All real property over EUR100,000 stands an especially slim chance of seeing a deal now.»

Dnbbustas has still many free apartments to offer in the tallest residential skyscraper in Lithuania, situated at a walking-distance to the mall Akropolis and pier in Klaipėda.

Having built the 34-floor skyscraper during the buoyant economy –and high labor costs – times in early 2008, the builder now is struggling with the sales, though the upper apartments overlook the offing of the Baltic Sea and the panorama of the Kuršių lagoon opens up already from the units on the sixth floor.

Characteristically to the seaport, getting an apartment leased is a very hard task, a result of the shortage of residential property rentals.

«Really, there’s no supply for that. Especially in the recently built property,» the broker said.

Good crediting conditions spur RE deals

Jūratė Radzevičiūtė, sales head at JSC Kauno būstai, a developer especially known for moderate-size «friendly-price» residential apartments in the coastal resort of Palanga, says that the predictions of looming stagnation in the real estate market after the euro adoption have been far from truth.

«Frankly, I haven’t felt anything stagnating; people keep calling and, in fact, there have been more callers, quite curious one, with a keen eye on what we have,» the broker told BNN.

She insisted that the interest in property has been high in all Lithuania in 2015.

«I heard from my peers that people have been particularly interested in buying land in early January, in Palanga, too,» Radzevičiūtė. «There are now very favorable bank crediting conditions, and people want to take advantage of that. There’s an overwhelming opinion that the real estate prices will be going up,» she added.

The experts agree that the market has bounced back and been bullish in the recent years.

As the demand for new residential property has been higher than the supply, developers are scrambling to pump money into new residential projects to meet the demand.

Energy-saving matters most now

Another significant shift in the market is Lithuanians’ rising consciousness of the real estate’s energy-saving characteristics.

«Big, castle-resembling, but wind-blowing-through-type of houses are already becoming a relic of the past and, certainly, a big burden for the owners. Nowadays, people tend to build smaller-size, energy-saving houses,» Lithuanian Environment minister Kęstutis Trečiokas was quoted as saying this week.

Statistically, over the recent years, most of the new houses take up approximately 150-160 square meters, but even smaller houses, up to 100 square meters, have also been popular.

Implementing the EU legislation, energy utility criteria have been set and are applied to the modernized or new living accommodations. When buying a real property, the buyer is entitled legislatively to be informed of the house’s or apartment’s so-called energy utility coefficient. As of now, there are 39 residential buildings in the country bearing the highest evaluation in energy utility.

«Energy-saving characteristics will definitely be a major factor in setting the price for real estate soon,» agreed Kirdulis, of the LREAA.

Ref: 020/111.111.111.2109


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