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Bank of Lithuania survey: Kaunas RE market is more tempting

In the opinion of professional real estate (RE) market participants, two largest cities in Lithuania have different RE market sentiment: the latest survey of the Bank of Lithuania shows that the interest in new-construction housing in Vilnius is waning, while in Kaunas it is growing. However, housing demand in the capital city has so far remained high, and the recent months’ data show the intensifying activity in Vilnius’ housing market. ‘We have been observing increasingly intensifying activity in the new-construction housing market in Kaunas, which is basically driven by inflows of significant investment in the region.

RE development companies invest in the construction of new offices and flats, and expect a few thousand new well-paid jobs in Kaunas to kick-start the provisional capital’s housing market, while companies operating in the city will continue moving to new modern offices thus improving working conditions for the employees,’ says Vaidotas Šumskis, Chief Economist at the Macro-prudential Analysis Division of the Financial Stability Department. In their assessment of Vilnius’ new-construction housing market, two-thirds of respondents believe that fewer flats will be purchased in the capital city over 2018 than were purchased last year.

Half of respondents claim that fewer flats will be constructed in the capital city over the coming year as well. Meanwhile, in Kaunas, the expectations are opposite: two-thirds of market participants expected that more new-construction flats would be sold, while more than half of the surveyed believed that more new-construction flats would be built.  The opinions also diverged on the dynamics of prices for new-construction flats in the residential districts of Vilnius and Kaunas. About 40% of respondents reported that, in the capital city, the prices for such flats would remain unchanged in the years to come, yet almost the same amount of the surveyed believed that the prices for new-construction flats in the residential districts on the city outskirts would go down. This shows dramatic changes in the sentiment: the number of so thinking has grown by 30 percentage points since mid-2017.

More than half of market participants who assessed the outlook for the housing market expected the prices for flats in this city’s residential districts on the outskirts to go up; so thinking increased by 16 percentage points in number. Contrary to Vilnius, market participants in Kaunas do not expect the prices to go down.   In projecting rent price trends, the best part of the surveyed believed they would remain unchanged in both Vilnius and Kaunas; a third of respondents, however, expected a decline in the prices for renting a home in the capital city. In Klaipėda, the surveyed RE market participants expected no changes of relative significance.

The data of the Centre of Registers show that fewer RE transactions were concluded in Lithuania over the first quarter of 2018 year on year, but the data for April and May suggest intensifying housing market activity, primarily in the capital city. In Vilnius and Klaipėda, the housing sales fell by 5.0% and 16.5% respectively, while in Kaunas they increased by 5%. However, in May, the housing market activity in the capital city was historically one of the most intensive ones, and was only lower to the activity levels recorded in March 2007. Year on year housing sales soared almost 40%. In Kaunas, the sales of flats and houses increased by 8%. More than 70 market participants took part in the Bank of Lithuania’s survey: valuators, sellers, credit institutions, RE developers and managers. Financial stability

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