Homes in Lithuania – more expensive than in Paris

Bankers have said that housing affordability in Lithuania has reached the level of Stockholm, London or Paris. For example, in Vilnius a person earning an average salary needs as many as nine years to save up for a down payment. Still, buyers will get some relief next year – the required down payment will decrease.

In one new multi-apartment residential quarter, a sales record has already been set – 24 apartments in 24 hours.

Last month, nearly 600 apartments were sold in Vilnius – about 20 apartments every day.

“It’s normal for sales to be around 300–400 apartments per month in Vilnius. Now, for several months in a row, we’ve been recording over 500–600 sales,” shared Arnoldas Antanavičius, Head of Business Development at “Profitus”.

However, the question arises: why are residents rushing so quickly to buy their own home?

“We have pension pillar money. The Bank of Lithuania is lowering the down payment, so people are trying to jump onto a train that’s already leaving,” explained Žygimantas Mauricas, Chief Economist at “Luminor”.

“Market professionals indicate that housing prices will rise,” said Judita Gedutienė, Commercial Director at “Omberg Group”.

But housing prices have already surged sharply this year. In Vilnius, housing became about 11% more expensive, while in Kaunas and Klaipėda prices rose by more than 15%.

“Over the last five years, the average salary has grown by 70%, and housing prices have also grown by 70%,” stated Greta Ilekytė, Chief Economist at “Swedbank”.

As a result, homeownership is becoming less affordable for many people, especially young families and those moving to the capital.

“A resident earning an average income can buy a home, but won’t be able to buy many square meters,” commented Ž. Mauricas.

What’s more, housing prices in Vilnius are approaching those of major European capitals: Stockholm, London or Paris.

“This indicator, compared within the European Union context, is among the worse ones. It’s even worse than in the capitals of Scandinavian countries, which are known for expensive housing,” said Ž. Mauricas.

“Currently, in Vilnius the possibilities are 64 square meters; in Klaipėda and Kaunas – around 90 square meters,” said G. Ilekytė.

Still, reaching a purchase requires long and difficult saving. In Vilnius, a person earning the average salary needs as many as nine years to save up for the down payment. In Kaunas – 7 years, in Klaipėda – 6, and in Šiauliai – 4. In addition, the saving period for a larger 90-square-meter apartment becomes even longer.

“It would take 12 annual incomes, whereas in Western countries the standard is 5 years,” the economist did not hide.

However, those who buy their first home next year will be able to accumulate not 15%, but 10% as a down payment.

“I don’t know where the relief is here. Most likely it’s pouring fuel on the fire,” commented A. Antanavičius.

According to experts, a smaller down payment will not solve the problem, because sellers have decided to raise prices even further.

“From December 1 we have already adjusted prices, we no longer apply discounts, and from January 1 we will review our pricing,” said J. Gedutienė.

Specialists said the problem will only be solved when residents have real choices. Developers, for their part, claimed that timelines are getting longer, so they cannot build new homes faster.

“We see that other market players will face challenges and supply will shrink,” stated J. Gedutienė.

“Abroad, when municipalities or the government take on certain projects, implement municipal housing or make housing development easier for developers – those would be examples of increasing supply,” explained A. Antanavičius.

According to bankers, next year housing will become more expensive similarly to this year – at a double-digit pace.

Read more here: https://lnk.lt/straipsniai/351262