Housing Market Developments in the Context of Modern Economic Conditions

Abstract

Major changes took place in Lithuanian housing market after 1990 and the economic situation of Lithuania after the Russian economic crisis improved. Housing market depends on the country's macroeconomic indicators: GDP growth, favorable mortgage, loan terms, low inflation, low unemployment, and others. Housing market boomed, which is now defined as "housing bubble". In 2004−2007, housing sales prices increased twice, respectively, to certain delays to increased rent prices. Listed prosperity distorted the housing market. Disproportionately in relation to all construction price appreciation index, and construction resources for the increase in price and increase in residential construction price. However, the structure of dwelling construction has not: the renovation of existing buildings did not reach the required level. To meet the recent resolutions of the Government on this issue, it is necessary to modernize the existing apartment houses and allocate funds at least than 1 / 3 residential building works carried out in volume. At the end of 2008 the global economic crisis appeared, the Lithuanian housing market was negatively changed in market prices, as the scale of residential construction, fell to 2005–2006 level. Despite that fact, under the current economic downturn conditions the favorable circumstances for the renovation of dwelling houses have occurred: the construction prices have decreased by 35–40 %, the growing prices of energy resources, high unemployment rate, etc. According to the, Lithuanian economic indicators projection economic improvement in the condition expected only from 2011. Only from this year some improvements in the housing market situation will appear.