Experts: As euro euphoria fades, new catalysts emerge for mortgage and real estate markets

The turmoil in the real estate (RE) market that began in the middle of last year, caused by fears that housing prices would rise rapidly after the introduction of the euro, has evaporated. However, according to data from SEB Bank and the real estate development and construction group Eika, new impetus is being given to both the housing loan and RE markets by growing household incomes, improving expectations for the future, low interest rates and an increasing supply of housing.

 

“The euro introduction factor had a significant impact on the real estate market, when last year the number of transactions jumped to 4 thousand contracts per month. Meanwhile, the housing loan market remained relatively stable last year, without major fluctuations. This could be explained by the fact that some people had postponed the decision to take on financial obligations for a while due to the geopolitical unrest in the East and their impact on the overall economy of the country and the entire world. However, analyzing the statistics, we see that this year the situation is changing, and residents are again more actively interested in housing loans,” says Virginijus Doveika, Deputy President of SEB Bank and Director of the Retail Banking Service.

 

SEB Bank granted 14 percent more housing loans in the first quarter of this year than in the same period last year. The value of new housing loans granted during this period reached EUR 47 million.

 

According to V. Doveika, the improving expectations of residents are also reflected in their changing needs when purchasing housing. “When analyzing statistics, we see that the average loan size is gradually growing, the duration of borrowing is getting longer. This indicates that some residents are taking on more responsibilities and are more actively looking for more expensive housing,” he says. According to SEB bank data, the average amount of a housing loan is currently 41 thousand euros (in the first quarter of 2012 – 39 thousand euros), and residents usually borrow for a period of 23 years (in the first quarter of 2012 – 20 years). As before, the bank granted the majority of loans this year (58 percent) to residents of Vilnius region.

 

The fact that Vilnius is the largest and most active real estate market is also confirmed by statistics from the Eika group of companies. According to Martynas Žibūda, Development Director of Eika, buyers here are increasingly actively looking for higher-class housing.

 

“During the first quarter of this year, half as many economy-class apartments and five times as many prestige-class apartments were sold in the capital. This change was driven by a significantly increased supply of luxury housing. We also noticed that buyers are actively choosing housing in houses that have not yet been built for themselves this year, while last year at the same time they were more likely to buy houses that have already been built, probably because they want to invest and fear a possible price increase after the introduction of the euro,” says M. Žibūda.

 

However, in M. Žibūda’s opinion, the euro effect has already disappeared and this year, buyers who purchase housing with their own funds are investing in real estate, considering it the most attractive choice for them not only today, but also in the long term.

 

According to the expert’s observation, although the demand for new housing in Vilnius is currently growing faster than the supply, considering the results of the first quarter of this year, it is likely that in 2015, sales of new apartments will remain at the record level of 2014, while the supply will climb to new heights and exceed the 4,000 apartment mark.