What housing can the average family buy?

We can say that the real estate market is thriving in our country again – there is a growing number of reservations and sales, the affordability of the dwelling is growing, and Greta Ilekytė, a senior economist at Swedbank, told more about it.

– How many reservations, sales and growth compared to last year?

– We are observing that the prosperity phase in the real estate market is in particular in Vilnius. Residents are in a hurry to buy their own housing – for example, the number of reservations in the primary market is twice the number of reservations as a year ago. We really see that residents were waiting – thinking, watching interest changes. Now that they have fallen, many are in a hurry to buy their own homes.

– You mentioned decreasing interest. Are there any other reasons why such growth is observed?

– Rapid salaries are one of the main factors. We see that last year salaries increased by more than 10 %, leading to increasing purchasing power of the population. Another important factor is home prices, which, especially in Vilnius, have not changed significantly over the years. Residents have better access to housing, and for almost a year we have been watching improving conditions for buying their own housing.

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– What housing can be purchased on average for metropolitan residents when it comes to square?

– The index we count assesses the size of the average family, which receives an average salary per month, when it accumulates 15 %. and borrows for a period of 30 years. We estimate that such a family can buy about 62 sq. M. m of housing, Kaunas – about 95 sq. M. m and about 88 sq. M. m. In Vilnius, of course, it is more difficult for residents to buy larger housing because prices are higher here.

– When it comes to the nearest future – whether affordability should continue to grow or, due to the growth of wages, the situation will change?

– We hope the affordability will continue to grow. Basic interest rates are a very important factor. We hope that the European Central Bank will reduce interest rates this year three times, and at the end of the year it will reach about 1.5 percent. Compared to peak, about 4 percent. – This is more than twice the decline in interest. This will certainly help residents make the decision to buy the housing they want.

– Will it not be that demand will increase, but prices will still not rise – ie the spring principle will not work for a large supply?

– Interestingly, in the last two years, when the real estate market has been sluggish, a large amount of unsold apartments has been formed. In addition, construction remains active enough. We observe that the number of free apartments on the primary market is in record highs – the highest in the last 7 years. Residents can currently choose from more than 6 thousand. apartments according to their capabilities and taste. It helps not only to buy a larger home, but also to choose one that best suits their needs. For example, in 2021-2022, the supply of free apartments had fallen into record lowlands – residents had nothing to choose from.

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– You are talking about the primary market. And does the secondary market also feel the revival?

– Yes, revitalization is also felt in the secondary market, but the original is particularly distinguished. This is interesting because, according to purchasing indicators in Vilnius, the situation is the worst among the capitals of the Baltic States. So colleagues often ask – what’s going on here? On the one hand, purchases are low, but the activity is highest. An important factor is that the primary market in Vilnius offers a wide variety of housing supply, from economic to prestigious class. Meanwhile, for example, in Tallinn, in recent years, developers have focused mainly on prestigious class housing, which for many has become unrealistic.

– When it comes to renting invests – is they currently favorable time, given the growing affordability and declining interest? Isn’t the rent of the rent anyway attractive enough?

– Return returns in recent years have been declining. It is now about 1 percent. the point is lower than before and is no longer so attractive to investors. For example, in Vilnius, the rent returns is about 4 %, with at least 5 % of the previously reached. Looking at alternatives – shares markets or other investment methods – the rental market is often no longer a priority because rental prices do not increase as fast as sales prices.