With real estate (RE) prices growing above 15 per cent, there are fears of an equally rapid price hike in the housing rental market. While REAL brokers say that the current price growth is seasonal, the economist warns of new trends and potential risks.

According to Tom Sovijus Kvainickas, Head of Investment and Analysis at Inreal Group, this year's price changes are difficult to compare with last year, as statistics have been distorted by quarantine processes such as reduced short-term rentals. Analysis of the data shows that, on average, housing for 1-4 rooms has increased by 80 euros since last year. "Last year the median price was 520 euros, this year – 600," T.S.Kvainickas calculated. The RE expert stressed that segments should be taken into account when comparing prices. According to him, in individual segments the price of housing has risen by about 10%, but there is also a significant increase in prices on rental housing portals. The most expensive rent in the Old Town – the rent of a two-bedroom apartment in 2020 amounted to 650 euros, and this year it cost a whole hundred more. In Antakaln, renting a two-bedroom apartment was expensive on average 80 eur. from 550 eur. last year to 630 this year , in Pilaitė – from 450 to 500 eur., while in the New Town it remained stable and reaches 600 euros for a two-room apartment.

According to Žygimantas Maurico, chief economist at Luminor, changes in house rent prices are strongly driven by rising wages, a gradually professional rental market and rising expectations of tenants. "The rental market in Lithuania is specific because it is not fully formed, therefore statistical price growth may be much higher than the actual one. Many landlords legalise, pay taxes, some homes are adapted directly to rent, and there are higher requirements. We move from the "bobby" market to the professional one. As quality rises, so does the price," the economist said. According to him, the current price growth is a big surprise: "The flows of expats and workers from third countries have been muted, inbound tourism has been significantly lower this year than last year. Price rises, given all these circumstances, are quite rapid." With real estate (RE) prices growing above 15 per cent, there are fears of an equally rapid price hike in the housing rental market.

Housing in Vilnius for the price of an apartment in Austin Ž.Mauricas warned that the major cities of the world are currently competing for workers, and the main competitive advantage becomes the rental price of housing. This trend is particularly pronounced in the United States (USA). A large part of the U.S. population leaves New York, Washington, Seattle, where the cost of housing per square meter reaches 4-9 thousand. 1800 euros and goes to Austin, Phoenix, Dallas or Atlanta, where a square meter costs 1800 euros. "Vilnius is currently more expensive than Austin." We don't have Tesla, but we have prices," said the economist. If Vilnius gets more expensive, according to Ž.Maurico, we will lose our international competitive advantage: "If we want to attract IT companies from Belarus, we have to find rental housing, which is difficult for us so far. If they do not find apartments at a reasonable price, they can go to another country".

Sigismund Maurice. The increase in the number of clients from Belarus is also noticed by real estate brokers. This, according to them, prevents the formation of an excess of supply. "If there were no Belarusian specialists, people renting housing for 550 euros would have to lower prices in order to be able to compete more easily. In this case, the difference between more expensive and cheaper housing would be reduced. Since there is movement in all segments, they do not put pressure on each other, so larger price differences are maintained," explained T.S.Kvainick. According to Marius Čiulada, head of the Old Town office of "Oberhaus", Belarusian specialists focus on 2-3-room housing and are ready to pay 500-700 euros for it, so they do not compete with students for housing. In winter, the planned fall in prices For housing rentals, it is highly dependent on the season. According to real estate specialists, the jump in rental prices is observed every year in the period between Herbaceous and Ghosts, and in winter prices fall. "If you don't rent it out in the winter, then you have to pay utility bills yourself, so the price goes down. If they see that expectations have been raised too much, maybe the price will adjust. Such double-digit growth can do the bear a disservice in the long term," explained Ž.Mauricas. He also noticed that the real estate market in Lithuania is beginning to change, which, according to the economist, can have long-term consequences.

The most expensive rent was in the Old Town. More houses than apartments "The number of house transactions in Lithuania is currently higher than that of apartments. This will give an impetus to the emergence of the home market, because at the moment we do not count the statistics of house prices, only apartments. This will also lead to the expansion of cities. There will be unprecedented suburban growth in major cities. The municipality has sought to invite more residents to the center, but the movement from it will be larger. We can cook porridge here because the infrastructure is not developed – there's not even a screw-up to Tarande," the economist said. According to the economist, Lithuania may eventually suffer the fate of the United States and Australia. Due to the extremely expensive plots, developers will begin to build apartments of an extremely small quadrature in the city center, which will be intended for short-term rent, and families will move to the suburbs. "But with us, the suburbs are untidy. There could be a lot of challenges in the near future," the economist warned. Undeveloped out-of-town infrastructure. Photo by T.Baur. We will not take over the German model Although real estate prices are rising rapidly, we will not adopt the German model, where most people do not buy their own housing, but rent it for life. "One of the foundations of liberal democracy is private property. When people do not own property, they have strange thoughts about how, for example, a referendum will be held in Berlin on 29 September to decide whether to expropriate housing from the landlord, because rents are supposedly rising very rapidly. I would not like such a model in Lithuania. Berlin is impoverished, because when there is no private property, a person is not interested in improving the environment. However, such a scenario is unlikely in Lithuania, because Lithuanians give priority to their own housing," said Ž.Mauricas. Whether the proposal of the Minister of Finance Gintarė Skaistė to tax real estate will help to control rising prices, the economist and brokers disagree. To News Radio, Mr Maurice said real estate taxation is a sustainable way to get additional revenue into the budget, but real estate experts said it is important to know the size of future taxes at this time. "The question of how big it will be – symbolic, is being increased gradually. I hope that there will be no introduction of drastic taxes. Finally, the question is where that money will go – to the general cauldron of the state budget, for municipalities, for the improvement of streets or infrastructure," M. Čiulada considered. He was also succeeded by T.S.Kvainick: "When it comes to 1-2 per cent, it's hard to answer what the actual impact is going to have. The value of the property is taxed on the tax value. The tax value often does not coincide with the real market value. This is very characteristic of new-build housing. If there are many new apartment buildings in the microdistrict, but there are also buildings of old construction, the old construction reduces the tax value – new apartments are diluted with old ones and their tax value decreases. He named what and why the best-selling homes are at the moment – a new approach to real estate In an attempt to save money, he gets caught in the trap of fraudsters: having agreed on the rental of housing on the Internet, he was left without money and without housing New buildings, which cost more in the market, but are not so much more expensive in tax terms, for them the tax is relatively small. There is a limit when the charge is insignificant for some and significant for others. For those who live in older housing, the tax feels faster than for those living in a new home. A small fee that is common to everyone would be easy to administer and would not be stressful, and when there are exceptions, different rates, again – if there is an exception, there is also a way to get around it."

Source: Warns of a changing rental market – if this continues, there will be trouble (lrytas.lt)