RE market: after variable 2011 more signs of life are being expected in 2012

Today, on the 28^th of February 2012 Inreal Group together with partners AB bank Finasta and law office Raidla Lejins & Norcous presents the Review of Lithuanian Economics and Real Estate Market 2011 – 2012 and states, that the year 2011 was particularly changeable for real estate (RE) market. It will depend on both general economic situation and funding policy of banks, whether investments to RE object will become more intensive. 

According to Rūta Medaiskytė, the macroeconomist of Finasta bank, the year 2011 was successful to economics of Lithuania. The year started with a careful optimism, which did not disappoint. The economic growth of the entire year was one of the highest in the European Union and was reaching 5.8 percent. Last year, the economic growth of Lithuania was resulted by a wider circle of factors than in 2010 – export market was supplemented by raising domestic demand. After recession of 2009, new economic development peak was achieved in the third quarter of 2011. However disturbances in Euro-zone financial sector and European economic slowdown negatively affected economics of Lithuania as well – the growth have noticeably decreased during the last quarter, and this tendency may remain in the coming quarters of 2012 as well.

RE market was developing in the same scenario, although the peak in it was reached about a quarter earlier. “Improving expectations of residents in the beginning of the year together with the financing policy of banks, becoming more lenient, were increasing the amount of contracts, liquidity of market was growing, vacancy of objects was decreasing, increase in prices of new, modern projects was recorded”, - says Arnoldas Antanavičius, the Manager of Consultations and Analysis Department of Inreal Management, noting that increase of prices was mostly noticed in the capital only, where RE market was the most active throughout the year 2011. According to him, apartment prices in new projects increased by approximately 5-7 percent, in market land plots and private houses – about 10-15 percent, and in market of business centres and sector of logistics – about 15 percent in Vilnius during the first half of the year. While in Kaunas or Klaipėda the price of only agricultural land increased. The prices in commercial sector remained stable, and the prices of apartments decreased by 1-3 percent at an average.

The maintenance of positive beginning of 2011 for the second half of the year was unsuccessful. Due to external factors of macroeconomics, business and customers’ expectations started to decrease, the increase of prices in all sectors has stopped, and the prices of new apartment houses being under construction have returned to the initial level. In the end of the year after the bankruptcy of bank Snoras have brought much confusion and significantly raised people’s distrust of the banking system.  However according to A. Antanavičius, this event, which has brought significant damage to the economics of the country, to some extent temporarily activated RE market, which once again was calm, because investment to RE is considered to be one of the best capital saving measures, particularly at the moment, when RE prices have significantly decreased. In accordance with PI Centre of Registers, the total amount of contracts on accommodation, concluded in November-December of 2011, was 610 million LTL, in other words, it was by one fifth higher than in the corresponding period of 2010, when the amount of concluded contracts on accommodation was 500 million LTL.

According to Aušra Mudėnaitė, the lawyer of the partner - law office Raidla Lejins & Norcous, the year 2011 was primarily important by the new luxury tax for RE – all RE property of residents, tax value of which exceeds 1 million Litas, was imposed a tax of 1 percent tariff. More important amendments have been accepted in the field of land tax – fee calculation procedure has been modified, which should become valid in 2013. It was sought to make the processes, such as RE purchase or mortgage contract conclusion, and property registration, etc., become more effective by other amendments of legislation on RE. Decision, advantageous to lessees, is worth to be mentioned among the precedents, established by the Supreme Court of the Republic of Lithuania this year, which decreases the tax due to the influence of economic crisis.

According to the authors of the review and considering the future prospects, the following 3 basic elements should be distinguished: situation in macroeconomics, financing policy of banks, and domestic consumption. The way, how RE market will be developing in 2012, will depend on these factors. Although the specialists of macroeconomics forecast a slower growth of the country for this year, however huge potential in a long-term perspective of the country is remaining, resulted by huge investments currently under implementation and planned to be implemented in new factories, sector of energetics, infrastructure and logistics. New investments would not only infuse additional capital into the economics of Lithuania, but would also help to create new jobs, improve climate in microeconomics and promote domestic consumption.

The review of economics and real estate market of Lithuania of 2011 is available on the website: www.inreal.lt.

ABOUT COMPANIES

Inreal group provides probably the widest spectrum of services in Lithuania, related to real estate and building maintenance services. The group consists of UAB Inreal Management, UAB Inreal, UAB Inreal Building Maintenance (related to companies, administering apartment houses), and UAB Inreal GEO. Inreal group companies belong to AB Invalda.

224 employees are currently working in Inreal group, the value of managed assets – about 400 million LTL, mediations  in   lease or sale of 550 thousand sq. m. of commercial premises and 1150 apartments, the value of asset, evaluated per year, is reaching 2 milliard Litas, and the area, administered by companies of building maintenance sector  - 1 million sq. m. Company offices or representations are operating in Vilnius, Kaunas, Klaipėda, Šiauliai, Mažeikiai, Alytus, and Plungė.

Investment bank Finasta, under the management of AB Finasta Holding, which was established in 2008, is the largest private banking bank in the Baltic countries, in accordance with the managed property and the amount of customers.

Specialization of the bank – services of investments and private banking. The bank provides complex investment management and company finance services to private and business customers, and offers nonstandard business crediting solutions.

Law offices Raidla Lejins & Norcous in Estonia, Latvia, and Lithuania are the leaders of legal services in the Baltic countries, where more than 100 lawyers work. Offices provide complex services to national, regional and international companies, among them – large corporations, international banks and financial institutions.

On the 8 of December 2011 Financial Times and Mergermarket recognized the law office Raidla Lejins & Norcous being the best legal adviser in the Baltic countries.

Raidla Lejins & Norcous Real estate and construction practice group is one of the strongest groups in Lithuania, uniting the lawyers of different profiles. One of the largest specialized real estate groups of lawyers is being managed by Aušra Mudėnaitė, the partner-lawyer.

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