“Inreal”: increasing employment will stimulate the housing market

March 9, 2016. According to “Inreal” analysts, when assessing the
statistics of housing transactions and the number of employees in Lithuania,
one can observe a strong direct link between these two rates. It is realistic
to expect for the increase in the employment rate in 2016, what should result
in the increase in the number of housing purchase-sale transactions. More
active RE market enables prices to grow, therefore if the latter trends
persist, the overall level of housing prices in Lithuania should be increasing
in 2016: by 5-6 percent in the apartment segment, and as a result of active increase
in supply in the private house segment, the prices should remain stable.

The apartment purchase-sale transactions have been
growing for five years in a row and stopped in 2015, while the overall decrease
in purchase-sale transactions by 8 percent was registered in the entire
Lithuania. It is difficult to expect for further growth in the market with the
rates reaching the previous apartment purchase-sale transactions, however,
according to “Inreal” analysts, it is not an argument to be used for objective
substantiation of future forecasts.

“We estimate that 100 new
jobs in Lithuania increase the number of purchase-sale transactions by 10-12
apartments and by 3-4 private houses”, – stated Arnoldas Antanavičius, the Head of
Investment and Analysis Department of “Inreal”.

In 2015, the number of people employed in Vilnius has decreased by about 6,000
and is already exceeding the pre-crisis level by 1 percent. The ongoing
development of companies, both local and foreign, and the creation of new jobs
in the capital city allow forecasting an increase in jobs by 2,000-3,000 at
least in 2016. 100 new jobs in Vilnius city increase the number of transactions
by 20-25 apartments and by 3-4 private houses, at an average. It allows
forecasting that in 2016 the number of purchase-sale transactions should grow
in Vilnius: apartments by 5-7 percent at least and private houses by 10-12
percent. Increasing demand in the active market of the capital city will be
putting pressure on prices, therefore it is realistic to expect for the
increase in apartment prices by 8-10 percent in 2016. As a result of extensive
supply of private houses, the prices in this segment will likely remain stable
or increase insignificantly.

The statistics of employed residents in Kaunas city is not favourable, thus in
2016 the activity of the market will be lower than in 2015. “Inreal” estimates
that 100 new jobs in Kaunas increase the number of transactions by 30-35
apartments and by 3-4 private houses, at an average. A similar change should be
registered in the event of decreasing number of employments. Nevertheless,
there are many perspectives for the statistics of employment to improve in
Kaunas, because more and more foreign companies are considering their
development in Kaunas rather than Vilnius, where labour and operating costs are
higher. This trend would essentially improve the situation and prospects in
Kaunas housing market.

A rather strong interdependence between housing purchase-sale
transactions and the number of the employed people is observed in Klaipeda. Unfortunately, the number of
employed residents was decreasing in Klaipeda in 2015. Respectively, less
activity in the housing market was observed. On the other hand, the number of employed
residents is reaching the pre-crisis level; meanwhile the activity of housing
market is less by approx. 30 percent than in 2007. Therefore, one can assume
that Klaipeda city has not exhausted its full potential yet and the activity of
the market should start growing. “Inreal” estimates that 100 new jobs in
Klaipeda increase the number of transactions by 25-30 apartments and by 1-2
private houses, at an average. It can be forecasted that in 2016 the housing
market in Klaipeda city should be more active: by approx. 10 percent in the
apartment segment, while the private house segment will likely remain stable.