Linas Jegelevičius
Certainly, for Lithuanian real estate (RE) market, 2023 will not be a blockbuster year. On the contrary, the market will likely sink in the doldrums, especially in the first half-year.
Yet no Lithuanian real estate expert expects double-digit plummets in RE prices, which Sweden, for example, has reported.
«Obviously, the first half of 2023 will be rather inactive, however, with the situation improving, we expect better sale results in the second half of the year,» Raimondas Reginis, Research Manager for the Baltics at Ober-Haus Lithuania, a major RE player, told BNN.
«Indeed, prices stopped growing and, in some sectors, started edging downward, but I really doubt if we can see a significant fall during 2023. Any decrease in the range of five percent is probable, more than that, up to 10 percent, is a possibility, but reductio beyond that does not seem likely,» he added reflecting on the situation in Sweden, where, according to the latest analysis from Norgea Banks, house prices have lately contracted 12 percent in nominal terms and 15 percent in real terms from their 2022 peak.
Most Lithuanian experts agree that, if a price fall shapes into a trend, it will affect only a small part of cottages, houses and apartments.
Meanwhile, the absolute majority of them will maintain very similar prices like those in 2022.
«Significantly contracting RE prices will not be a mass phenomenon in the primary market. Some segments will be cheaper, especially where there will be more competition, yet, overall, market activity will be lower. The most significant change in prices will be where expectations were highest,» says Tomas Sovijus Kvainickas, Head of Investments and Analysis of Inreal Group.
Agreeing, Mindaugas Statulevičius, head of the Lithuanian Real Estate Development Association says: «If there will be a decrease, it will be in a very narrow segment. Where companies may have missed the mark with pricing. Smaller developers who will need to cash out faster by selling homes. Basically, the big developers, I think, will keep the prices stable and wait. Apparently, they will consider the offers of buyers,» he told Delfi.lt, a Lithuanian news website.
Meanwhile, Vaidas Šimaitis, a RE developer in Palanga, Lithuania’s gem Baltic resort, believes that the resort town is in a good position «to beat all odds again».
«The resort has done that not a single time already. Its real estate has been booming for quite a while. The pandemic gave it a big boost, and the resort is seen as a safe harbour now,» he told BNN.
Yet he agrees too that the local real estate market experiences a «certain temporary slowdown».
«But we always see it at the turn of years and during the first months of a new year. I am sure that, starting March and April, we will see invigoration like always,» Šimaitis emphasised.
He stresses that, unlike in the capital city, there is no excess of unsold real estate in Palanga.
«I am afraid that those who expect radical contraction in housing prices will bite dust at the end of the day. Simply speaking, there is no room – or little room – for a price decrease. Look, the prices of materials, the costs of labour went up dramatically following war,»
Šimaitis underscored.
In fact, some RE pundits believe that some of the newly built housing may even become more expensive. Experts note that although loan interest rates are rising, the number of borrowers has decreased by a small amount – banks are not pushing the brakes on handing out loans yet.
«It would be quite bold to say that prices will decrease, because there is also support from the banks and the willingness of a certain part of the public to continue buying, because high inflation continues to encourage people to do something with their money, instead of sitting and waiting for something that will never happen,» says RE expert Arnoldas Antanavičius.
Martynas Stankevičius, head of «Rontgen», a crowdfunding platform (SFP) that finances real estate projects, predicts that developers may start building «in warehouse» this year, while already completed apartment buildings will be offered.
«Recently, the prices of raw materials and materials have been normalising, which makes it possible to better forecast and plan real estate development and actually carry out work, but decreasing housing affordability, worsening economic situation and consumer expectations, and rising interest rates are already limiting and will continue to limit the activity of some buyers for some time. This will mean that home buyers will have more leverage and opportunities to choose,» M. Stankevičius is quoted by Lithuanian media.
In his words, if Lithuania and the world do not experience new major shocks, the sales of new apartments should recover to the usual level of 400-500 units per month in the next six months. He also predicts that in 2023 the price of plots with building permits may increase significantly.
Yet, like the majority, Aurimas Čiagus, the manager of the rental (rent and buy) company «Mano numai», operating under the brand name «Numai», predicts that real estate prices in the primary market will adjust downwards.
«According to our preliminary assessment, on average, this decrease can reach 10-15 percent. However, currently there are individual projects on the Vilnius market, the price corrections of which may be even more significant. This is due to excessively high prices offered by developers, which are far from the sums that buyers looking for housing are ready to pay,» A. Čiagus told BNS Plus.
Evidently, flat and home buyers will have the upper hand this year.
«Buyers looking for housing will continue to be able to make decisions, negotiate the price and other terms of the contract without haste.
Meanwhile, developers are likely to offer various promotions more and more often, for example, when purchasing real estate, a parking space or a storage room is given as a gift, which disappeared when the number of sales transactions increased significantly,» believes A. Čiagus.
Meanwhile, Laurynas Kuzavas, head of the real estate development company «Sirin Development», predicts that as energy becomes more expensive, tenants will continue to look for more sustainable and energy efficient solutions, starting with solar power plants, economical heating and lighting, and ending with thoughtful and professional real estate management.
A very important person for the local real estate market, Gediminas Šimkus, Chairman of the Board of the Bank of Lithuania (LB), says that, this year, the increase in interest rates will continue to have impact on the real estate market, which is now seeing a certain respite compared to the price growth in 2020 and in the second half and in 2021. According to him, respite in the market considering the past situation is «a good thing», but it is important that it does not last long.
As a reminder, in mid-December, the European Central Bank (ECB) increased the three main interest rates by 50 basis points. Lithuania’s central banker believes that the ECB will raise the base interest rates further. According to him, they may be increased by 50 basis points at the euro zone central bank board meeting in February. The next ECB meeting on monetary policy is scheduled for early February.