DNB Bankas, part of Norway's largest financial group, expects the mortgage loan market to be most active in Vilnius this year. The mortgage loan market in the capital city will be stimulated by the supply of new attractive housing, relatively low interest level, and newly developing segments of home buyers. The growth will be slowed down due to the increased down payment amount and the limited growth rate of real salary.
"The prices of residential housing in the country's capital have been stable for several years now, while the interest rates have been going down within this period. This has a positive effect on the mortgage loan market in Vilnius, however a higher growth is muted as more capital has to be accumulated to make the down payment ,and also the, real salary growth rate is relatively low at the moment. On the other hand, given the increased supply of newly constructed housing in attractive locations of the city and a higher purchasing power of Vilnius residents, we can expect a moderate growth of the mortgage market," - said Edvardas Uziala, Manager of Vilnius Business Region at DNB Bankas.
Stable prices for housing, relatively low interest rates
The statistics shows that the housing prices in Vilnius have stabilised and have been on a similar level for several years: from 2009 the average sales price per 1 sq.m. of residential housing has ranged within an interval from LTL 4.5 thousand to LTL 5.1 thousand. According to E.Uziala, no significant leap in the Lithuanian economy or growth of individuals' income is expected in 2013, therefore the average prices for housing are likely to remain on a similar level.
The year 2012 was favourable to mortgage borrowers as the interbank interest rates were record low, while the interest rates in EUR and in LTL became quite similar. Due to the dropped interbank interest rates, the average monthly mortgage instalment was also decreasing, e.g. the average instalment for a two-member family in Vilnius amounted from LTL 745 (in case the loan was taken in EUR) to LTL 802 (on a loan in LTL)[1]. Whereas, in 2009 when the interest rates rocketed as a result of the economic recession, such average instalment on a loan in LTL would have made LTL 2051 and an instalment on a loan in EUR would have amounted to LTL 1107. According to the information available to DNB Bankas, last year the majority (78 per cent) of mortgage loans were issued in euros while the loans in litas accounted for just over one fifth (22 per cent) of the mortgage loans portfolio.
Last year, an average loan in Vilnius amounted to LTL 181 thousand and was the highest compared to other towns (in Klaipėda the average loan was LTL 156.9 thousand, and in Kaunas it stood at LTL 132.5 thousand). From 2008 the average loan amount was gradually going down mainly due to the decreased housing prices, purchasing power and larger amounts of down payments made by individuals. Last year the average maturity of a mortgage loan issued by DNB Bankas in the country's capital was 28.3 years.
Rational borrowing
According to Edvardas Uziala, Manager of DNB Vilnius Business Region, cheaper mortgage loans and a sufficient supply of good quality housing encourage the residents of Vilnius to take mortgage loans but after the economic crisis individuals became more cautious when making the decision to take a mortgage loan, they are more rational in evaluating their possibilities to purchase and maintain housing.
"Before making the decision to take a mortgage loan, consumers now carefully evaluate all criteria: the value of housing, maintenance expenses, their own financial situation and perspectives. Therefore, besides a competitive interest, one of the major competitive advantages in the mortgage loan market is the bank employees' competence in providing complete information to a customer," - says E.Uziala.
According to E.Uziala, new segments of buyers are developing in the capital's housing market that will have effect on the situation in the mortgage loan market. The expert says that now we can distinguish several types of buyers: young families, successful professionals seeking career, financially stable mature persons, and persons with investment goals.
Families of young specialists starting to live independently (aged 25-35) are interested in economic class housing so that the maintenance (mortgage loan instalments, utility fees) does not complicate the financial situation. Their parents often help them to purchase housing, e.g. by financing the down payment instalment.
Another growing segment: specialists successfully making career (aged 30-45) who purchased housing some 3-7 years ago and now that they have families they are planning to sell the existing housing and purchase a larger place to live.
Mature persons (aged 40-55) with secured financial future are mostly professionals who have achieved high results in their career, medium and top level managers. This segment of buyers wants to benefit from the favourable situation in the housing and loan market and seeks to acquire housing of better quality and higher value. e.g. an individual house or an apartment in the town centre.
And also, there is a segment of buyers who have enough funds to purchase immovable property without taking mortgage loans; these are mainly persons who want to invest in the real estate market.
[1] Two-member family in Vilnius that has LTL 180,000 mortgage loan with 28 years' maturity.
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