Increasing tension in the real estate markets of economically strongest cities of the world

Swiss bank UBS has reported about the rising risk of housing bubble in some major cities across the world. According to the bank’s index (Global Real Estate Bubble Index), the bubble risk has grown in Toronto, Stockholm, Munich, Vancouver, Sydney, London and Hong Kong. In contrast, housing is fairly valued in Milan, New York, Singapore and Boston.

The attractiveness of economically strongest cities across the world remains high and increases the bubble risk in the real estate market. “Great interest in housing both from foreign investors and local market participants, positive expectations about future housing prices, and historically low mortgage costs rapidly increase housing prices, which in some cases have already reached or are in excess of the price levels that were a decade ago. The demand for buy-to-let property and slow supply of new housing significantly increase the gap between the big cities and the remaining regions of the countries and at the same time reduce the possibilities of the residents of major cities to buy residential property,” Raimondas Reginis, senior market analyst of Ober-Haus, said.

Meanwhile in Lithuania, similar trends have been observed since 2010: a growing gap between the housing prices in Vilnius and other regions of the country, demand for buy-to-let property, record low mortgage interest rates, and largely moderate or positive expectations about future housing prices. “These factors determine housing price growth in the country, particularly in the capital city. However, our most active regions are protected against greater price changes by sufficient supply of new housing and the real implementation of macroprudential policy. Although over the past seven years housing prices in Vilnius increased by 25% on average, even faster wage growth keeps the housing affordability levels record high,” Mr Reginis said. According to Ober-Haus, today an inhabitant of Vilnius can purchase 5.9 sqm in a medium class apartment for his average net annual salary. This indicator is nearly twice as high as that in 2006–2007, since both nominal and real prices are far behind the price level recorded 10 years ago.

“However, with faster growth of housing prices the Bank of Lithuania may introduce stricter lending criteria for mortgages in an attempt to cool the housing market. The rise of “frozen” interest rates could also be effective in naturally controlling both the Lithuanian real estate market and the markets of the regions at risk of a bubble,” Mr Reginis said.

Latest news

All news
Ober-Haus Celebrates 25 Years: How Has the Property Market Changed in a Quarter of a Century?
2023-11-07

Ober-Haus Celebrates 25 Years: How Has the Property Market Changed in a Quarter of a Century?

In 1998, the Lithuanian real estate market was characterised by a lack of housing, poor credit conditions and an underdeveloped commercial real estate sector. Over the last 25 years, the number of apartments for sale has increased more than 10-fold, housing market activity has almost quadrupled, lending rates have fallen from double to single digits, and modern office buildings and shopping malls are now numbering in the hundreds – that’s the picture according to the Ober-Haus Real Estate Market Review 1998–2023, conducted to celebrate the company’s 25th anniversary. The Year 2000 Marked the Beginning of the Creation of the Lithuanian Real Estate Market The years 1998–2000 can be considered as the period when the real estate sector in Lithuania began to evolve. Due to the absence of credit services, the Lithuanian population was mostly only able to purchase a home using their own funds, and commercial construction with the intention to sell or lease was in its infancy. And so, 25 years ago, investors were developing single apartment blocks, business/office assets and shopping centres, where any new development for sale or rent was regarded as a significant event in the real estate market. The Russian economic crisis, which began in…

Buyers Show No Interest in Overpriced Housing
2023-10-24

Buyers Show No Interest in Overpriced Housing

The Ober-Haus Apartment Price Index for Lithuania (OHBI), which captures changes in apartment prices in the five largest Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), remained unchanged in September 2023 (August 2023 figures had shown 0.4% growth). The overall level of apartment prices in Lithuania’s major cities grew by 2.6% over the last 12 months (an annual growth of 4.9% in August 2023). In September 2023, Klaipėda, Šiauliai and Panevėžys recorded 0.2%, 0.3% and 0.4% growth respectively, and the average price per square metre rose to EUR 1,613 (+3 €/m²), EUR 1,103 (+3 €/m²) and EUR 1,078 (+4 €/m²). Meanwhile, in Vilnius and Kaunas, the average price per square metre decreased by 0.1% month-on-month to 2.568 Eur (-3 €/m²) and 1.724 Eur (-2 €/m²) respectively. Over the year (September 2023 as compared to September 2022), apartment prices grew in all major cities of the country: in Vilnius – by 2.6%, in Kaunas – by 3.2%, in Klaipėda – by 1.6%, in Šiauliai – by 3.7%, and in Panevėžys – by 2.5%. The stagnation period in the Lithuanian housing market continues. Although the market activity indicators do not show any signs of improvement, the majority of home sellers have not…

Office sublease: thousands of invisible square metres
2023-10-02

Office sublease: thousands of invisible square metres

In the office segment, the phenomenon of sublease – the transfer of part of a company’s leased premises to a third party – became popular during the pandemic and has remained since. The market of subleased property is usually not included in the official statistics published by real estate agencies. According to OBER-HAUS, current tenants of Class A and Class B+ business centres in Vilnius alone could be offering several thousand or even tens of thousands of square metres of space for sublease. Sublease is usually simply understood as renting space not directly from the owner or manager of a business centre, but from an existing tenant established and operating in the business centre. The principle of sublease itself existed long before the pandemic, but has only become more popular in recent years as businesses switched to remote or hybrid work, consequently, the amount of space required for their operations has decreased. OBER-HAUS estimates that since the beginning of the pandemic, the average office space in Vilnius has decreased by about 30%. In other words, companies entering into new contracts today are renting office space by almost a third smaller than a few years ago. However, office lease contracts are…

All news

This website uses cookies. You can confirm your acceptance by clicking the "I Agree" button or by continuing to browse. I agree

Mail sent!

This site is registered on wpml.org as a development site.