According to Swedbank’s calculations, housing affordability in Vilnius has slightly improved. On average, Vilnius residents were able to buy slightly larger than 50 sq. m. m. size apartments, but the affordable area increased by only half a square meter during the quarter. In Kaunas and Klaipėda, housing affordability did not change during the quarter.
Vytenis Šimkus, senior economist of Swedbank, comments on housing affordability data in Vilnius:
As expected, housing affordability trends are improving consistently, but rather slowly. Wages in Vilnius grew faster than expensive housing, and since July As interbank interest rates moved more downwards, average mortgage interest rates decreased. In addition, the growing supply of housing in the capital will allow residents to look for the most favorable options. So far, the change has not been significant, but more rapid progress is expected in the coming quarters.
Despite the fact that the reservation data published by real estate developers show that sales this year are approximately 30 percent lower. higher than last year, activity in the housing market continued to be relatively low in the second quarter of this year. At that time, the percentage of growth is determined by the extremely low level of sales recorded in the corresponding period a year ago. The data of the Registry Center also shows the low activity of transactions – the number of new apartment transactions continued to fall, on the other hand, there is a visible revival in the secondary market.
Price dynamics continue to show favorable trends for buyers. According to the data of the Center of Registers, the annual price growth slowed down from 8 to 6 percent during the quarter. On the other hand, the index of recurring transactions shows that the monthly price change in Vilnius has been negative for three consecutive months, while prices have not increased at all during the year. The high number of unsold homes on the market and the still relatively fast pace of construction gives hope that future housing price spikes will be avoided as demand picks up.
Affordability improved in Tallinn, while it did not change in Riga
Housing affordability was somewhat higher in Riga and Tallinn than in Vilnius. Residents of Riga, like the m. in the spring, could buy almost 83 sq. m. apartments, affordability in Tallinn increased by one square meter during the quarter and reached 56 square meters. m.
“The trends did not change much in all three capitals. In Tallinn, due to the poor affordability of the primary market, residents more actively bought relatively new apartments in the secondary market, this structural change increased the average price of the secondary market. Such trends illustrate that fundamental demand for housing exists, but new housing is often too expensive. Average mortgage interest rates in Latvia are about half a percent higher than in Lithuania or Estonia, but these differences should decrease in the next few quarters,” comments Vytenis Šimkus.
Euribor will continue to moderate
Swedbank predicts that the ECB will cut the base interest rates twice more this year – in September and December, so the Euribor will approach 3% at the end of the year. cards.
“We forecast that the ECB will continue to cut interest rates, and they should fall to 2 percent by the end of next year. Base interest rates, which have fallen by two percentage points since the peak, will increase housing affordability by approximately 10 square meters. However, in the near future, the increase in affordability will be mostly influenced by income growth and stagnant housing prices, not changes in interest rates,” says Nerijus Mačiulis, Swedbank’s chief economist.
Rental returns remain at decade lows
The rental yield calculated by Swedbank has hardly changed and is at the lowest level in more than a decade in all major cities of Lithuania. This indicator shows what part of the housing price is the annual income from its rent. Currently, the rental return in Vilnius is 4.9 percent, in Kaunas and Klaipėda – about 5.8 percent.
“In the last quarter, rental prices in Vilnius rose faster than the selling price, but the rental return lags behind the long-term historical average by more than a percentage point. Bearing in mind that the return of alternative investment instruments, such as bonds, has significantly increased in recent years, there are still very few buyers of investment housing in the housing market”, assesses Nerijus Mačiulis.
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2024-08-20 06:11:41
