An analysis of dwelling market in Vilnius Lithuania.

1. INTRODUCTION

Every day one can read in newspapers or magazines about the problems associated with the development of real estate market. Some articles write about constantly growing property value, others describe a vicious policy of the state, hampering the development of construction and real estate market. Some call this price rise a bubble or nonsense, while others provide weighty arguments trying to explain price variation.

A sharp rise in dwelling prices can be observed in the most of rapidly developing countries (Hui and Yue, 2006). Their markets are very attractive to investors. When dwelling prices sharply rise, investors start fixing the profit, the offer is growing and this can lead to market stagnation or even recession. Not only the developing countries, but a number of highly developed countries, such as Japan (Kim and Suh, 1993; Hirayama, 2005), Sweden (Turner, 1997), Finland (Doling and Ruonavaara, 1996), Spain (Fernandez-Kranz and Hon, 2006), the USA (Mueller, 2002; Belke and Wiedmann, 2005) and others, experienced a sharp rise of dwelling prices and the subsequent market recession. This may be associated with globalization of financial markets which strongly affects real estate market, causing its cycling fluctuations (Renaud, 1997; Wilson et al., 2007; Tasan-Kok, 2007; Galiniene, et al., 2006). It can be expected that processes, currently taking place in the real estate market of the Baltic States, will soon proceed in rapidly developing Balkan, Caspian Sea region and Latin American countries. Dwelling prices in Vilnius have been rising since 2001 (Raslanas, 2004). The last drop in prices was caused by the Russian crisis. Naturally, when the prices are rising, more and more companies, having nothing in common with real estate market, start developing housing projects because they see that a market imbalance is favourable for property owners and sellers. Sometimes, such companies even discontinue their former activities to concentrate on the development of housing projects. In some cases, housing projects are being developed without licences or when master or detail plans have not been approved and the projects have not been discussed with residents. This causes a lot of problems. Besides, not all companies are financially stable to undertake such projects, and the problem of their reliability arises. To assess the financial state and reliability of companies, their financial indices, reflecting the actual situation, are determined (Hsieh and Wang, 2001). The timely analysis of the financial indices can reveal the financial difficulties of a company and even the threat of bankruptcy (Pindado and Rodrigues, 2004; Beaver et al., 2005).

When dwelling prices are growing, newly-built dwellings become too expensive for most of residents, therefore, renovation of old dwelling blocks becomes an attractive alternative (Zavadskas et al., 2003 and 2004; Yetgin and Lepkova, 2007; Andruskevicius, 2005). The most influencing quantitative criteria, determining property value, are as follows: location and type of dwelling building, year of construction and the condition of dwelling (Raslanas et. al., 2006). Therefore, in the analysis of dwelling prices in Vilnius, the prices of the renovated dwellings are considered along with the prices of old and new dwellings.

Great interest of the society in the state of real estate market, the problems arising and the importance of the ongoing processes and problems stimulate the investigation of the dynamical real estate market.

2. BRIEF OVERVIEW OF DEVELOPMENT OF HOUSING MARKET

It can be stated that during the last seven years great qualitative changes have taken place in the market of dwelling buildings (see Table 1) and single-family houses (see Table 2). In 1998-2000, there was a shortage of dwelling in the newly-built houses. The dwellings there were affordable only for a small group of purchasers. Now, the situation has changed, and the dwellings in old large panel houses are mostly occupied by low income residents, while people with higher income (especially, young generation) prefer flats in newlybuilt houses.

The dwellings in houses built in 1996 and later are considered to be new. In 1996, the construction of multistorey buildings was resumed in Vilnius. When Lithuania separated from the Soviet Union, the construction of such houses was suspended for some reasons for the period from 1990 to 1995. Until the end of 1998, the construction of new multi-storey residential houses was very slow: only one or two buildings were constructed annually.

However, the situation dramatically changed at the end of 1998 and at the beginning of 1999, when unprecedented boom in dwelling purchasing took place in Lithuanian real estate market. The demand for housing and price of dwellings had considerably increased (at that time, the demand for small dwellings was almost twice as large as the offer), and this demand had to be satisfied. Therefore, a new stage of Vilnius dwelling market development has started since the end of 1998, when a competition between old and newly-built dwelling began. Since then the offer of new dwellings has been constantly growing. The demand has also been growing because a crediting system in Lithuania has made great progress. Now, it seems unbelievable that interest rate of bank credits reached 14-15%, while banks financed only 70% of the mortgaged dwellings seven years ago. For this reason, the operations of purchasing-selling of new dwellings made only about 10% of all deals in real estate market in 1998. The difference between the prices of old and new housing units has also been increasing.

A comparative analysis of old and newlybuilt dwellings shows that the prices of old dwellings are less dependent on the district where they are located than the prices of newly-built dwellings. Even the prices of dwellings in large-panel houses built in 1960-1980 in prestigious districts (Antakalnis, Zverynas) do not differ considerably from those in the so-called "bedroom" districts, such as Seskine or Justiniskes. This market situation may be accounted for by the fact that one of the key criteria determining dwelling price, along with the location of a dwelling block, is comfort. Dwelling buildings (especially, large-panel houses) built many years ago have poor thermal and sound insulation (between rooms and adjacent flats) and lay-out. If such houses have not been renovated, their engineering equipment (pipelines, heating systems, etc.) as well as roofs and staircases are in a poor state. Moreover, heating expenses of an old dwelling of the same floor space as a newly-built dwelling are much higher.

A view formed that the autumn of 1998 was the most favourable time for purchasing a dwelling gradually led to the greatest boom in real estate purchasing which Vilnius had not seen since the end of 1998--the beginning of 1999, when the trade became more brisk due to the Russian crisis and award of the first housing credits (supported by Vilnius municipality). By the way, the interest rates for commercial bank credits in 1998-1999 were not less than 10% either in Litas or foreign currency. In the third and fourth quarters of 2003 the interest rate for credits taken in Litas ranged from 4.5% to 4.8%, while ranging from 3.6 to 4.2% for credits in Euro. In addition to objective factors influencing the market, such as the conditions of crediting, the economic development of the state, standard of living of the population, migration, etc., some subjective factors also had a great influence on the situation. At the end of 1998, one of the key factors influencing market activities (in addition to the improved crediting conditions) was the fear of the possible failure of the financial system in Lithuania and the consequent loss of money kept in the banks. At the end of 2003, one of the causes of the purchasing boom was the anticipated rise in real estate prices, when Lithuania was gradually integrating into the European Union. By comparison, the prices of average and higher grade dwellings in the capitals of West European and Scandinavian countries were not lower than 1750-2900 Euro/[m.sup.2], while the price of the highest grade dwellings located in the central districts of some cities reached 5800-8700 Euro/[m.sup.2] (Vienna, Dublin, London, Paris). However, it is hardly fair to compare only the prices of dwelling. The payment and social security systems are also very important. The salaries and wages of the residents of Western countries are 5-6 times those of Vilnius residents, while their social security and taxation systems are more advanced. Quite a few housing units (dwellings, single-family houses, plots for housing) are bought with the aim of profitably selling them when the prices rise. This causes an imbalance of the market. Price rise which is not economically grounded (especially, when a considerable part of constructed buildings are kept for profiteering) often leads to stagnation or recession. State authorities and municipalities should encourage the development of housing units rather than their delay. For example, in many countries, the time of building construction or reconstruction is legally regulated.

It should also be noted that dwellings in low-rise dwelling houses and semi-detached houses located in not so densely built-up areas or near green zones, ponds or lakes, oriented to higher quality of life of residents rather than to building up the area as densely as possible, are in great demand and have a great potential for price rising (Stankevicius, 2005).

The advantages and disadvantages of living in a single-family house and in a dwelling are given in Table 3.

There are some rich people who do not like living in a single-family house, while others take bank loans to build it. Now it is cheaper to buy a small frame single-family house than a dwelling in the city centre. Recently, many plots around Vilnius have been returned to their former owners. Quite a few detail plans are being prepared to change the status of agricultural areas to the sites for housing. Moreover, the construction of single-family house is likely to grow because banks are crediting not only the purchasing of single-family houses under construction or already completed buildings but also support purchasing of the plot. Families of people about 30-50 years of age are mostly interested in the projects of semi-detached houses. Recently, the demand for semi-detached houses constructed in the less noisy suburbs of Vilnius has increased. This is the best solution for people with more than average income who still cannot afford to buy a single-family house.

In 1990-1993, businessmen, who got rich very quickly, built a lot of large single-family houses of 500-1000 m2, which were not economical and had no distinctive architectural style in such districts as Zujanai, Pavilnys, Bukciai, Tarande, Kairenai. At that time they could hardly believe that energy resources would not be cheap forever, while their luck in business would be short-lived. Therefore, now there are quire a few of these 'monsters' which have never been completed and nobody is interested in purchasing them. A decade ago, considerably decreased income, increased costs of building materials, electric power, and, particularly, costs of public utilities, as well as not fulfilled promises of the authorities, put an end to the dreams of some compatriots filled with gigantomania to build single-family houses-castles. In 1999-2001, the single-family houses of 250-350 m2 of floor space with basements built in good districts of the city were most popular. Now the tendency of building smaller singlefamily houses without basements and garages can be observed.

3. THE ANALYSIS OF REAL ESTATE DEVELOPERS

3.1. The activities of real estate developers

The current situation in the real estate market is favourable for real estate developers because dwelling prices are growing and the demand is great, though some signs of recession in trade can be observed in this sector.

It is quite natural that, when dwelling prices are rising, the income is also increasing (see Table 4).

The growing income of the real estate sector and high profit attract more and more companies to real estate market (Figure 1).

Companies engaged in other activities are also attracted (see Table 5) to this profitable business. In this case, they start housing construction as additional or even main activities. Moreover, companies which own valuable plots are often privatized and their profile is changed to housing construction (Stankevicius, 2005).

3.2. The financial indicators of real estate developers

The financial indicators (presented below) of the following real estate developers were determined based on their financial account for 2005 obtained from the State Enterprise Centre of Registers (2007): 'Hanner', 'Eika', 'YIT Kausta Bastas', 'Junesta', 'Luidas', 'Mabilta'. The values obtained were compared (see Table 6).

Note: 1 Euro = 3.4528 Litas (LTL).

Index value:

* Total profitability. The index value ranges from 10-35%. The data obtained show that all companies (except for 'Mabilta') are within this range, while 'Hanner' even exceeds the maximum index value. A small value of this index in 'Mabilta' indicates that it has some problems with bearing of charges.

* Profitability of typical business activities. The index value shows total profitability, with business expenses taken into account. Hanner's value is the highest again. The value of this index at 'Mabilta' is negative because of large business expenses.

* Profitability of usual business activities. The index value denotes total profitability, with business expenses and income obtained from investments and other activities taken into account. Nearly all companies considered had losses in their financial and investment activities. This can be accounted for by the fact that most housing projects are being developed for loans, and interest payments greatly affect the value of the profit (loss) in the account records. The company 'Hanner' gets high profit from the financial and investment operations, and, therefore, the considered index value of this company is positive.

* Net profitability. The index value under highly developed market conditions is in the range of 10-25%. Only the company's 'Eika' index is in this range, while Hanner's index exceeds the above values. The low values of the considered index for the companies 'YIT Kausta Bastas', 'Junesta' and 'Luidas' can be explained by their high expenses on financial and investment activities. A low value of the above index at 'Mabilta' can be accounted for by high business expenses.

* Cost-effectiveness of business activities. The index value lower than 5% is unsatisfactory. For the companies Manner', 'Eika' and 'Luidas' the values exceed 5% limit, which indicates that company executives can control business expenses. In the companies 'YIT Kausta Bastas' 'Junesta' and 'Mabilta' the index values are low because of large business expenses.

* Net capital profitability. The state of the company is very good if the value of this index is more than 20%, it is good if it makes more than 15% and satisfactory if it is more than 8%. The values of the above index are lower than satisfactory for all companies, implying that their own and loan capital is not effectively used to get profit. This could be explained by relatively low profit and rapidly increasing costs of construction, strongly affecting incomplete projects.

* The ratio of current assets to current liabilities. The ratio exceeding unity means that a company is solvent but the situation is risky. A safe value is 1.5. The companies 'Eika', 'YIT Kausta Bustas', 'Junesta' and 'Mabilta' have values higher than that while Hanner's ratio is only higher than unity, but not reaching 1.5. This indicates that its solvency is at risk. In 'Luidas' the value of the considered index is lower than unity, implying that there is a threat that the company can fail to meet its short-term commitments.

* The ratio of equity to liabilities. The higher the above ratio, the higher the liquidity level, the lower the financial risk and threat of bankruptcy. All the companies have the index values lower than two considered to be satisfactory. This shows that their liabilities exceed their equity many times. For the company 'YIT Kausta Bastas' liabilities exceed the authorized capital 100 times! This is because their authorized capital is small.

* The ratio of current assets minus stock to current liabilities. If the ratio is equal to unity, it means that a company can meet its current commitments very quickly. This index value was found only in the company 'YIT Kausta Bastas'. The companies Manner', 'Junesta', 'Luidas' and 'Mabilta' have index values higher than 0.5, which is considered to be satisfactory. Lower than satisfactory index value of 'Eika' and its high current liquidity indicate that the company has large stocks and much of its working capital is frozen.

* Net working (floating) capital. The value of this index should be positive. The higher the value, the higher the company liquidity. According to this value, the companies are rated in the descending order as follows: 'Eika', 'YIT Kausta Bastas', 'Mabilta', 'Hanner' and 'Junesta'. A negative index value of 'Luidas' shows that the company can fail to meet its short-term commitments.

* Net working capital ratio. A higher ratio indicates higher company liquidity. According to this index, 'YIT Kausta Bustas' has the highest liquidity, which is followed by 'Hanner', 'Mabilta', 'Junesta' and 'Eika'. A negative index value of 'Luidas' shows a threat of bankruptcy to this company.

* The ratio of assets to liabilities. The ratio of 30% is considered to be very good. The highest admissible value can be 70%. If the value is above 100%, a company is considered to be insolvent according to the law of bankruptcy of Lithuanian Republic. 'Hanner' is the only company which does not exceed the specified limit. Other companies have the index values in the range of 80.68-86.13%, indicating that they use too much of the loan capital. The value of this index for 'YIT Kausta Bastas' (98.62%) is approaching 100%, which means the insolvency risk.

* The ratio of floating debt to net worth. The ratio of 20-40% is considered to be good. The companies 'YIT Kausta Bastas' and 'Junesta' exceed the specified limit, which means that they can fail to meet the short-term commitments. The index values of other companies are within the limits.

* Golden balance rule. The value of unity or lower is considered to be satisfactory. The companies 'Eika', 'YIT Kausta Bastas', 'Junesta' and 'Mabilta' values are smaller than unity. The values of 'Luidas' and 'Hanner', which are respectively higher and above unity, show that their long-term investments are financed at the expense of short-term liabilities.

* Own capital return. This index shows own capital profitability, i.e. a profit share per one Litas of the company's own capital. According to this index, the company 'YIT Kausta Bastas' is the best, with its 0.84 LTL per 1 LTL. However, in this case, high profitability is attained because of small fixed capital and a big share of loan capital of the company. One Litas of Manner' generates 0.2 LTL, of 'Eika'--0.16 LTL, of 'Junesta'--0.07 LTL and of 'Luidas' -0.19 LTL. One Litas of 'Mabilta' own capital brings 0.27 LTL of losses.

* Return of long-term assets. This index shows profitability of long-term assets, i.e. a profit share per one Litas of long-term assets. The highest value of 0.25 LTL is found at the company 'YIT Kausta Bastas'. This can be explained by the fact that the company's longterm assets are scarce. Long-term assets of 'Mabilta' bring 0.11 LTL of losses.

* Return of short-term assets. The index refers to profitability of short-term assets, i.e. a share of profit per one Litas of short-term assets. According to this index, the company 'Hanner' is the best, with its 0.28 LTL return per one Litas of short-term assets. The company 'YIT Kausta Bastas', having high return of its own capital and long-term assets, is the second with 0.01 LTL profit. Longterm assets of 'Mabilta' bring 0.09 LTL of losses.

* Own capital turnover. The index shows the income brought in by one Litas of the company's own capital. The higher the index value, the higher the efficiency. 'YIT Kausta Bastas' is the best according to this index because one Litas of its own capital brings in 29.15 LTL. However, this high level is achieved because the company's nominal capital is small, while the share of loan capital is big. The index value of 'Mabilta' is 5.33 LTL, the values of 'Junesta' and 'Luidas' are more than 3 LTL, while the index values of 'Eika' and 'Hanner' are 1.46 LTL and 0.47 LTL, respectively. Own capital of the last two companies is very large.

* Fixed assets turnover. The index shows the income per one Litas of fixed (long-term) assets. The higher the index value, the higher the efficiency of a company. An optimal value is about 10. The values of 'YIT Kausta Bastas' and 'Junesta', which are 8.75 LTL and 8.33 LTL, respectively, are the highest. Fixed assets of other companies do not bring in high income.

* Short-term assets turnover. The index shows the number of complete assets cycles per year. According to this index, short-term assets are most effectively used by the companies 'Luidas' and 'Mabilta'.

4. THE ANALYSIS OF DWELLING PRICES IN VILNIUS

4.1. Trends of dwelling prices

Now, a tendency of sharp rise in prices of newly-built dwellings and those located in prestigious districts, the city centre and the Old Town can be observed, while the prices of old dwellings in remote districts remain unchanged and can gradually decrease (Figure 2).

High demand for dwelling houses, a limited choice of plots, rapidly growing land prices (during a year the prices of plots suitable for housing rose by about 100%) make the construction companies, which purchase plots, assume that they will sell the constructed dwellings at a higher price than their current market value. The cost of construction based on this assumption implies that most of construction companies are going to compete in the market not by price, but by other marketing tools (because price rise is often provided for in their business plans). Therefore, it may be concluded that great changes (e.g. sharp decrease of prices) in dwelling market can hardly be expected in the near future. However, we can expect at least a slower rise and stabilization of dwelling prices in the near and more distant future (Ober-Haus, 2005).

4.2. Differentiation of dwelling prices

A new trend observed in dwelling market development is associated with its stratification. The difference in price between the cheapest and most expensive dwellings is growing, reaching now 4-5 times compared with 3 times in the previous years. In the member-states of the European Union the average value is about 6. In order to describe price differentiation of Vilnius dwellings more precisely, they are classified according to their type, location, district and condition.

Average monthly prices of dwelling are calculated based on the criteria described above and the monthly price lists found in Ober-Haus (2005) tables. In this way, the differences between the dwellings having a different number of rooms and different market values was eliminated. Then, the average prices were calculated for the quarters of the year and graphs demonstrating price differences were plotted. In Table 8, price variation in per cent is shown from various perspectives: by comparing the prices in the 4th quarter of the year with the prices of the same period of the previous year as well as by comparing the 4th quarter prices of the years 2006 and 2004 and the prices of the 4th and the 1st quarters of the same year.

As shown in Figure 3, at the beginning of the period considered the difference between newly-built and renovated dwellings in the centre of Vilnius was insignificant, however, in the 2nd quarter of 2004, it grew up to 290 Euro/ [m.sup.2] and made 1070 Euro/[m.sup.2] in the 4th quarter of 2006. The price of newly-built dwellings in the same period of 2004-2006 increased considerably, reaching in the 4th quarter of 2005 the value of 2627 Euro/[m.sup.2]. The price of renovated dwellings also increased and reached 2154 Euro/[m.sup.2] at the end of 2005. The price of non-renovated dwellings rose slightly in 2004-2006. This may be accounted for by the fact that rich customers purchasing prestigious dwellings want something special and their requirements can be more easily satisfied by constructing a new dwelling than by reconstructing an old one.

In prestigious districts the price rise of dwellings was different. Since the 1st quarter of 2004 till the 1st quarter of 2005, the most expensive dwellings were those in renovated houses and only in the 2nd quarter of 2005 the newly-built dwellings became more expensive (1490 Euro/[m.sup.2]), while the price of renovated dwellings reached about 1400 Euro/[m.sup.2]. This was because old houses are often located in very good places and renovation increases their value, while it is getting more difficult to find a good site for building a new dwelling house. Since the 2nd quarter of 2005 till the 4th quarter of 2006, the difference in price had been growing and reached 609 Euro/[m.sup.2] at the end of the period. In the same way, the continuous price rise of non-renovated dwellings can be explained by their advantageous position and possibilities to renovate them at any time.

A survey of dwelling price variation (expressed as a percentage) in the city centre and prestigious districts in 2004-2006 has shown the highest price rise of newly-built dwellings. A comparative analysis of dwelling price rise in the 1st-4th quarters of 2004, 2005 and 2006 revealed that the rapid increase in prices characteristic of the years 2004-2005 had considerably slowed down in 2006.

As shown in Figure 4, price variation in remote and other districts is more balanced. The price rise of dwellings in large-panel, brick and newly-built houses was smooth. Dwelling prices in brick houses were higher than those in large-panel houses. It can be seen that in the 2nd quarter of 2005 the prices of dwellings in brick houses do not differ much from the dwelling prices in newly-built houses. This is because there are not so many brick houses in Vilnius. Moreover, due to a shortage of newly-built dwellings, the prices of dwellings in brick houses have increased considerably. A deficiency of new dwellings at that time also caused a price rise of dwellings in large-panel buildings.

The analysis of dwelling price variation in 2004-2006 expressed as a percentage has shown that the highest price rise can be observed in the value of panel house dwellings of old construction (Table 7). The same actually refers to the dwellings in old brick houses. However, the price rise of newly-built dwellings was not so high. In 2006, the tendency of dwelling price rise in large-panel houses, observed in 2005, gave way to the reduction of prices in this sector. Thus, a negative change in dwelling prices is recorded in the 1st-4th quarters of 2006.

4.3. A comparative analysis of dwelling prices in Vilnius and the capitals of other EU member-states

According to the data provided by the association of European developers, the highest growth of real estate prices last year can be observed in the developing economies. In the developed EU economies the price rise was insignificant and even a certain reduction of dwelling values could be observed. CEPI (Council of European Real Estate Professions) experts recorded the highest rise of price during the last year in Latvia, Romania and Turkey.

The prices of single-family houses and dwellings rose by about 30% in these countries. Lithuania and Poland came next. By comparison, the price of single-family houses dropped by 1.4% and the price of flats--by 2.2% in Germany, while in Austria the price of dwellings decreased by about 2.4%.

The average prices of dwellings (Euro/m2) in the capitals of the EU member-states based on the data provided in 2004 by CEPI (European Council of Real Estate Professions: CEPI, 2004) and Ober-Haus (2005) are given in Figure 5.

It is evident that the average price of 1 m2 of the dwelling floor space in Vilnius, the capital of Lithuania, is much lower than that in other European capitals. For example, the average price of 1 [m.sup.2] of floor space in Vilnius is by 8.9 times lower than the price in Paris and by about 8 times lower than in Barcelona or Vienna. In fact, dwelling prices in Vilnius make one-fourth of the average European prices. They are lower than the prices both in the old EU member-states and the capitals of the Baltic Sea states. Dwelling prices in Vilnius are by about 38% lower than the respective prices in Riga, by 72% lower than in Warsaw and make half of the price in Tallinn. Only in the capital of one new EU member-state Ljubljana of Slovenia the real estate prices are higher than those in the capitals of old EU member-states, such as Berlin in Germany, and Brussels in Belgium.

In Figure 6, the variation of dwelling prices in the capitals of the EU member-states in 2003-2004 is demonstrated. The highest price rise can be observed in the Baltic Sea region. The prices in Vilnius and Tallinn increased by 25% and in Riga by 30%. However, it can be seen that dwelling prices also increased in the capitals of old EU member-states, such as Paris, Barcelona, Luxembourg, Copenhagen and Stockholm.

[FIGURE 5 OMITTED]

[FIGURE 6 OMITTED]

4.4. Forecasts of dwelling price variation

It is evident that dwelling prices in Vilnius are much lower than those in other EU member-states. However, the rate of their increase is one of the highest in the European Union.

In Figure 7, forecasts of dwelling price variation in Vilnius and the capitals of the EU member-states are presented. It can be assumed that the growth rate both in Vilnius (25%) and in other European capitals (11%) will remain unchanged.

[FIGURE 7 OMITTED]

Then, the average dwelling price of the EU member-states could be achieved by 2017. However, the authors think that this is not the goal that Lithuania should seek to attain trying to reach the level of other EU countries.

A continuous growth of dwelling prices makes it difficult to predict what market prices will be in the near future. Though the price rise in this segment is associated with the improving economic situation in Lithuania, the growing income and more favourable conditions for getting loans for dwelling purchasing, these factors are not sufficient to explain this rise. There are also some negative effects which play an important role in the process of price rising. These are imperfect construction regulating laws, the delayed return of land to legal owners, the flow of 'shadow economy' money to real estate market and, in particular, profiteering in the market, causing a sharp rise in dwelling prices.

Since the real estate market is highly dynamical and indeterminate, forecasts of dwelling prices are made only until the 1st and 2nd quarters of 2007. The forecasts are based on trend equations of price variation curves. In Table 8 and Figure 8, the forecasts of dwelling prices in the centre of Vilnius, Old Town, Uzupis, prestigious and other districts are presented. Given the data on twelve quarters, we can try to predict the average dwelling prices for two other quarters (in general, 14 periods) and substitute 13 for the variable x in the equation to obtain a forecast for the 1st quarter of 2007. By substituting 14 for the variable x, we get a forecast for the 2nd quarter of 2007. The data obtained are rounded off accurate to one Euro.

5. CONCLUSIONS

In 2006, the tendency of high rise of dwelling prices, prevailing in 2004-2005, gave way to a moderate increase of prices and even to their reduction in some segments. The differences in prices of newly-built, old and renovated dwellings became more appreciable. The same refers to dwelling prices in various districts of Vilnius. The analysis of percentage variation of dwelling prices from various perspectives has shown that, in 2006, the highest growth was characteristic of dwellings located in the centre of Vilnius and in prestigious districts. According to the short-term forecasts made, high price rise can be expected in the same districts in the near future. The price of old houses in remote districts was reducing (taking into account the inflation of 3.7%), while the market value of newly-built dwellings remained unchanged.

It is clear that the situation in the real estate market has changed. Therefore, to protect the investments in dwellings, customers should carefully select the investment projects, paying special attention to reliability and competence of project developers. The analysis of financial indices of six specially selected project developers made by the authors allowed them to state that not all real estate developers in the market are reliable and able to satisfy liability claims because they may face solvency problems. In some cases, indices even warn about a threat of bankruptcy for a company.

[FIGURE 8 OMITTED]

REFERENCES

Andruskevicius, A. (2005) Selection of prefabricated construction renovation variants: social and information aspects. Business: Theory and Practice, 6(3), p. 187-197.

Beaver, W H., McNichols, M. F. and Rhie, J.-W. (2005) Have financial statements become less informative? Evidence from the ability of financial ratios to predict bankruptcy. Review of Accounting Studies, 10(1), p. 93-122.

Belke, A. and Wiedmann, M. (2005) Boom or Bubble in the US real estate market? Intereconomics, 40(5), p. 273-284.

Doling, J. and Ruonavaara, H. (1996) Home ownership undermined? Journal of Housing and the Built Environment, 11(1), p. 31-46.

European Council of Real Estate Professions: CEPI. (2004) EU real estate market annual report 2004 http://www.cepi.be/pdf/cepiAR2004.pdf [accessed 2005 05 20].

Galiniene, B., Marcinskas, A. and Malevskiene, S. (2006) The cycles of real estate in the Baltic countries. Technical and Economic Development of Economy, 12(2), p. 161-167. (In Lithuanian).

Fernandez-Kranz, D. and Hon, M. T. (2006) A cross-section analysis of the income elasticity of housing demand in Spain: is there a real estate bubble? Journal of Real Estate Finance and Economics, 32(4), p. 449-470.

Hirayama, Y (2005) Running hot and cold in the urban home-ownership market: the experience of Japan's major cities. Journal of Housing and the Built Environment, 20(1), p. 1-20.

Hsieh, T. and Wang, M. H.-L. (2001) Finding critical financial ratios for Taiwan's property development firms in recession. Logistics Information Management, 14(5/6), p. 401-413.

Hui, E. C. M. and Yue, S. (2006) Housing price bubbles in Hong Kong, Beijing and Shanghai: a comparative study. Journal of Real Estate Finance and Economics, 33(4), p. 299-327.

Kim, K.-H. and Sub, S. H. (1993) Speculation and price bubbles in the Korean and Japanese real estate markets. Journal of Real Estate Finance and Economics, 6(1), p. 73-87.

Mueller, G. R. (2002) What will the next real estate cycle look like? Journal of Real Estate Portfolio Management, 8(2), p. 115-125.

Ober-Haus (2005) A survey of real estate market (May, 2005). http://www.ober-haus.It/file.php?id=479 [accessed 2005 05 181.

Pindado, J. and Rodrigues, L. F. (2004) Parsimonious models of financial insolvency in small companies. Small Business Economics, 22(1), p. 5166.

Renaud, B. (1997) The 1985 to 1994 global real estate cycle: an overview. Journal of Real Estate Literature, 5(1), p. 13-44.

Raslanas, S. (2004) Research of market value of multistorey housing in Vilnius city. Technological and Economic Development of Economy, 10(4), p. 167-174. (In Lithuanian).

Raslanas, S., Tupenaite, L. and Steinbergas, T. (2006) Research on the prices of flats in the South East London and Vilnius. International Journal of Strategic Property Management, 10(1), p. 51-63.

State Enterprise Centre of Registers (2007). http://w3.registrucentras.lt/index-en.php [accessed 2007 02 27].

Stankevicius, D. (2005) Vilnius real estate market analysis, Bachelor thesis, Department of Construction Economics and Property Management, Vilnius Gediminas Technical University, 2005, 72 p. (In Lithuanian).

Statistics Lithuania (2007) Statistical Yearbook of Lithuania, Department of statistics to the Government of the Republic of Lithuania, Vilnius http://www.stat.gov.lt/ [accessed 2007 03 20].

Tasan-Kok, T. (2007) Global urban forms and local strategies of property market actors. Journal of Housing and the Built Environment, 22(1), p. 69-90.

Turner, B. (1997) Hausing cooperatives in Sweden: the effects of financial deregulation. Journal of Real Estate Finance and Economics, 15(2), p. 193-217.

Wilson, P. J., Stevenson, S. and Zurbruegg, R. (2007) Foreign property shocks and the impact on domestic securitized real estate markets: an un observed components approach. Journal of Real Estate Finance and Economics, 34(3), p. 407-424.

Yetgin, F. and Lepkova, N. (2007) A comparative analysis on housing policies in Turkey and Lithuania. International Journal of Strategic Property Management, 11(1), p. 47-64.

Zavadskas, E. K., Kaklauskas, A. and Banaitis, A. (2003) Development strategy of construction sector in Lithuania until 2015. Part 1: Analysis of strengths, weaknesses, opportunities and threats. Technological and Economic Development of Economy, 9(3), p. 81-96. (In Lithuanian).

Zavadskas, E. K., Kaklauskas, A. and Banaitis, A. (2004) Development strategy of construction sector in Lithuania until 2015. Part 2: Vision, mission, strategic goals and actions of implementation of strategic objectives. Technological and Economic Development of Economy, 10(1), p. 7-21. (In Lithuanian).

Zavadskas, E. K., Kaklauskas, A. and Raslanas, S. (2004) Evaluation of investments into housing renovation. International Journal of Strategic Property Management, 8(3), p. 177-190.

Gintautas AMBRASAS (1) [email] and Danielius STANIKEVICIUS (2)

(1) Department of Construction Technology and Management, Vilnius Gediminas Technical University, Saul@tekio al. 11, LT-10223 Vilnius, Lithuania E-mail: gintasa@st.vgtu.lt

(2) Department of Construction Economics and Property Management, Vilnius Gediminas Technical University, Saul@tekio al. 11, LT-10223 Vilnius, Lithuania and Junesta Ltd, Laisves pr. 71-45, LT-07189, Vilnius, Lithuania E-mail: Danielius.Stankevicius@junesta.lt

SANTRAUKA

BUSTO RINKOS ANALIZE VILNIUJE

Gintautas AMBRASAS, Danielius STANKEVICIUS

Dabartine situacija nekilnojamojo turto rinkoje yra palanki nekilnojamojo turto imonems--nekilnojamojo turto rinkos dalyvems. Busto kainos Vilniuje yra gerokai zemesnes nei analogisko busto kainos senosiose Europos Sajungos salyse narese, o pastaraisiais metais kainu augimas--vienas sparciausiu lyginant su ES. 2003 m. kainu augimo bumas netgi buvo siejamas su istojimo i Europos Sajunga lukesciais. Augancios nekilnojamojo turto rinkos pajamos i didelis pelnas i nekilnojamojo turta rinka pritraukia vis daugiau nauju imoniu. Kad apsaugotu savo investicijas i nekilnojamgji turta, pirkejai turi atidziai rinktis investicinius projektus, ypatingq demesi skirdami projekto pletotoju kompetencijai. Autoriu atlikta sesiu pasirinktu imoniu, investuojanciu i Vilniaus nekilnojamojo turto rinka, lyginimas leidzia teigti, kad toli grazu ne visos analizuotos imones pajegios ivykdyti savo prisiimtus sutartinius isipareigojimus. Atskiri rodikliai tam tikra prasme gali byloti ir apie imones bankroto pavoju. Be objektyviu veiksniu, daranciu, itaka nekilnojamojo turto rinkai (tokiu kaip kreditavimo salygos, salies ekonomikos pletra, visuomenes gyvenimo budo standartai, migracija ir pan.), ivairus nepalankus veiksniai taip pat daro nemaza itaka kainu augimui rinkoje, todel autoriai analizuoja skirtingu busto segmentu kainu skirtumus Vilniaus nekilnojamojo turto rinkoje, ju kitimui darancius itaka veiksnius ir tendencijas.

Received 23 March 2007; accepted 2 July 2007 Table 1. Dwellings built in 1995-2006

1995 1996 1997 1998 1999 2000 2001 Dwellings 3368 3281 3173 2160 2580 2559 1987 Per 1000 1.5 1.6 1.6 1.2 1.2 1.3 1.1 inhabitants Useful floor 207 209 210 167 225.9 185.5 129.5 space of dwellings, thous. [m.sup.2] Average floor 62 64 66 77 87.6 72.5 65.2 space per dwelling, [m.sup.2]

2002 2003 2004 2005 2006 * Dwellings 2563 2535 3920 3250 4512 Per 1000 1.3 1.3 2 1.7 2.10 inhabitants Useful floor 182.3 179.7 256.4 651.6 770.80 space of dwellings, thous. [m.sup.2] Average floor 71.1 70.9 65.4 72.2 68.50 space per dwelling, [m.sup.2] * Unofficial Source: Statistics Lithuania (2007) Table 2. Single-family houses built in 1995-2006

1995 1996 1997 1998 1999 2000 2001 Houses 2232 2343 2389 1890 1674 1904 1798 Useful floor space 358 422 397 325 292.3 321.1 255.8 of houses, thous. [m.sup.2] Average floor 160 180 166 172 174.6 168.6 142.3 space per house, [m.sup.2]

2002 2003 2004 2005 2006 * Houses 1999 2093 2884 2683 7292 Useful floor space 277.8 311.7 442.0 416.8 462 of houses, thous. [m.sup.2] Average floor 139 148.9 153.0 155.4 166.2 space per house, [m.sup.2] * Unofficial Source: Statistics Lithuania (2007) Table 3. Advantages and disadvantages of living in a single-family house and in a dwelling

Living in a single-family house Transport Problems of transportation, higher transport

expenses than in the city. Infrastructure Usually, underdeveloped infrastructure: it is

difficult to get to entertainment and health care

institutions, shops, libraries, schools,

kindergartens, etc. which are far away. Air pollution Natural and healthy environment. Noise level Low. Safety Children can safely play in the court-yard

without supervision of grown-up family

members. Relations with Few neighbours, stresses, conflicts, etc. neighbours Maintenance costs Relatively high maintenance costs. of dwelling Looking after the More problems with keeping the territory clean territory and and taking care of plants (to some people it is plants an advantage). Psychological A sense of real home, private territory, space satisfaction and freedom; good conditions for being

creative.

Living in a dwelling in the city Transport Smaller transport expenses, available public

transport. Infrastructure Usually, highly developed infrastructure: it is

easy to get to the city centre, entertainment and

health care institutions, schools, kindergartens,

etc. which are not far away. Air pollution Unhealthy environment. Noise level High. Safety It is not safe to leave children alone to play in

the court-yard. Relations with The more neighbours, the higher estrangement; neighbours the larger house, the more difficult it is to

maintain order in it. Maintenance costs Lower maintenance costs. of dwelling Looking after the Less problems with keeping the territory clean territory and and taking care of plants, but additional expenses plants on country-cottages, gardens, garages, and going

out of town. Psychological No sense of real home, no aesthetical satisfaction. satisfaction Table 4. The income of real estate sector in Lithuania in the period of 1998-2005

Income, million Euro Type of business 1998 1999 2000 2001 2002 Real estate operations 156.40 199.40 207.50 306.90 356.50

Income, million Euro Type of business 2003 2004 2005 Real estate operations 359.50 418.00 616.1 Source: Statistics Lithuania (2007) Table 5. Assessing real estate market according to SWOT Strengths Weaknesses * The economic growth of the state * Inconsistent taxation policy of leads to the increase of real the state. estate. * No clear vision of urban * Banks credit dwelling purchasing development. on favourable conditions. * The law of territory planning * Rapid development of chains of in Lithuania is imperfect. building materials stores and * There is a lack of by-pass tough competition provide highways around the cities, customers with a wide choice of therefore there are jams on goods at low cost. urban motorways." * Investment in real estate is * Some projects are being safe and reliable. developed without licences, which * There is a considerable number causes corruption. of construction companies in * The process of returning plots Lithuania which can build of land to their lawful owners high-quality houses according to exceeded the time limit. the complicated projects provided * Due to emigration of qualified by customers. construction workers, there is a

lack of labour force for building,

renovation and repairs. Opportunities Threats * Such indicator as floor space * Lots of bureaucratic procedures per head in Lithuania is much may cause the present investors lower than in other EU in housing projects to leave and member-states (23 m2 in Lithuania to scare away new investors. and ~57.5 [m.sup.2] in EU) * Cities are being built up too (Andruskevicius, 2005), densely which leads to therefore it can be increased. disappearance of green zones and * New construction projects can causes more jams trafic. be developed in smaller towns and * The continuous price rise can regions of Lithuania. cause 'overheating' of the real * More residents will move to estate market. suburbs because of improving * High dwelling prices do not transport services, changing allow many people to buy attitudes to the distance from dwellings. home to work or city centre as * Banks striving to slowdown the well as their need for healthier price rise of dwellings and environment. single-family houses will limit * Lithuanians who earned money their crediting. abroad often invest it in real * The tax for real property of estate in their own country. physical persons can be * The problem of the growing introduced. unemployment in the state regions * Real property tax for juridical caused by population migration to persons can be increased. large cities is being solved by the authorities. * Old dwelling houses are being renovated which can reduce their maintenance costs and ensure energy saving. Table 6. The selected financial indicators of real estate developers Total profitability, % (Total profit /Net sales income) X 100% Profitability of typical (Profit from typical business activity/

business activities, % Net sales income) X 100% Profitability of usual (Profit from usual business activity/ Net

business activities, % sales income) X 100% Net profitability, % (Net profit /Net sales income) X 100% Cost-effectiveness of (Profit before tax /Total expenses) X 100%

business activities, % Net capital (Net profit /Average material wealth value)

profitability, % X 100% The ratio of current Short-term assets /Short-term liabilities

assets to current

liabilities The ratio of equity to Own capital / Total liabilities

liabilities The ratio of current (Short-term assets - Stocks) /Short-term

assets minus stock to liabilities

current liabilities Net working (floating) (Short-term assets) - (Short-term

capital, million LTL liabilities) Net working capital Net working (floating) capital /Assets

ratio, % The ratio of assets to (Total liabilities /Assets) X 100%

liabilities, % The ratio of floating (Short-term liabilities /Assets) X 100%

debt to net worth, % Golden balance rule, % Long-term assets / (Own capital + Long term

liabilities) X 100% Own capital return Net profit /Own capital Return of long-term Net profit /Long-term assets

assets Return of short-term Net profit /Short-term assets

assets Own capital turnover Net sale income /Average own capital Fixed assets turnover Net sale income /Average value of long-term

assets Short-term assets Net sale income /Average short-term assets

turnover

Harmer Eika YIT Junesta Luidas

Kausta

Bastas Total profitability, % 43.60 29.09 15.74 13.57 15.05 Profitability of typical 41.68 18.44 10.09 4.38 6.17

business activities, % Profitability of usual 50.62 13.75 4.17 2.28 5.99

business activities, % Net profitability, % 42.55 10.83 2.89 1.88 5.27 Cost-effectiveness of 73.69 18.21 4.96 2.44 6.40

business activities, % Net capital 7.10 3.06 1.17 1.31 2.65

profitability, % The ratio of current 1.1606 1.9008 2.1219 1.5718 0.9453

assets to current

liabilities The ratio of equity to 0.5501 0.2395 0.0140 0.2315 0.1610

liabilities The ratio of current 0.9902 0.3865 1.2257 0.5916 0.8927

assets minus stock to

current liabilities Net working (floating) 21,713 59,601 52,415 7,107 -428

capital, million LTL Net working capital 3.54 31.31 50.44 33.34 -1.50

ratio, % The ratio of assets to 64.51 80.68 98.62 81.20 86.13

liabilities, % The ratio of floating 22.07 34.76 44.95 58.31 27.41

debt to net worth, % Golden balance rule, % 0.9545 0.5200 0.0838 0.2001 1.0206 Own capital return 0.2002 0.1582 0.8437 0.0695 0.1913 Return of long-term 0.0955 0.0901 0.2532 0.1566 0.0358

assets Return of short-term 0.2774 0.0462 0.0122 0.0143 0.1024

assets Own capital turnover 0.4705 1.4605 29.1511 3.6987 3.6296 Fixed assets turnover 0.2245 0.8317 8.7492 8.3338 0.6795 Short-term assets 0.6520 0.4270 0.4228 0.7586 1.9423

turnover

Mabilta Total profitability, % 3.50 Profitability of typical -5.17

business activities, % Profitability of usual -5.15

business activities, % Net profitability, % -5.15 Cost-effectiveness of -4.92

business activities, % Net capital -4.98

profitability, % The ratio of current 2.4824

assets to current

liabilities The ratio of equity to 0.2217

liabilities The ratio of current 0.8186

assets minus stock to

current liabilities Net working (floating) 25,765

capital, million LTL Net working capital 33.79

ratio, % The ratio of assets to 81.85

liabilities, % The ratio of floating 22.79

debt to net worth, % Golden balance rule, % 0.5624 Own capital return -0.2746 Return of long-term -0.1148

assets Return of short-term -0.0881

assets Own capital turnover 5.3320 Fixed assets turnover 2.2288 Short-term assets 1.7103

turnover Table 7. The variation of dwelling prices in 2004-2006

2004 Q1- 2005 Q1- 2006 Q1- 2004 Q4-

2004 Q4 2005 Q4 2006 Q4 2006 Q4 The centre of Vilnius, Old Town and Uzupis newly-built dwellings 28.98% 31.70% 14.44% 138.61% renovated dwellings 17.12% 27.05% 8.89% 97.76% non-renovated dwellings 17.36% 25.13% 7.75% 79.58% Prestigious districts newly-built dwellings 7.73% 59.18% 6.17% 148.95% renovated dwellings 11.76% 25.68% 1.63% 71.05% non-renovated dwellings 10.44% 30.12% 4.21% 96.19% Residential districts newly-built dwellings 6.75% 37.23% 4.54% 79.86% dwellings in large-panel 6.08% 59.56% -0.79% 106.17% houses dwellings in brick houses 5.11% 45.85% 3.12% 99.63% Other districts newly-built dwellings 10.64% 34.24% 13.64% 103.85% standard dwellings 17.12% 42.65% 7.14% 126.92% Table 8. A forecast of dwelling prices in the centre of Vilnius and prestigious districts

Forecast Type of dwelling Equation 2007 Q1 2007 Q2 Newly-built dwellings in y = 240.8 x + 836.9 2294 2534 the center of Vilnius Renovated dwellings in y =165.5 x + 799.7 2951 3117 the center of Vilnius Non-renovated dwellings y = 102.1 x + 717.6 2045 2147 in the center of Vilnius Newly-built dwellings in y = 174.5 x + 517.2 2786 2960 prestigious districts Renovated dwellings in y = 100.6 x + 799.4 2107 2208 prestigious districts Non-renovated dwellings y = 95.75 x + 529.2 1774 1870 in prestigious districts Newly-built dwellings in y = 142.2 x + 0.1 1849 1991 residential districts Dwellings in large-panel y = 77.57 x + 386.1 1395 1472 houses in residential districts Dwellings in brick y = 78.55 x + 460.9 1482 1561 houses in residential districts Newly-built dwellings in y = 67.46 x + 373 1252 1320 other districts Newly-built dwellings in y = 77.11 x + 236.5 1239 1316 residential districts Figure 1. Companies engages in real estate operations Source: Statistics Lithuania (2007)

Enterprises 2001 1284 2002 1501 2003 1569 2004 2028 2005 2209 Note: Table made from bar graph. Figure 2. The dynamics of dwelling prices in 2004-2006

Price, Euro/[m.sup.2]

Quarter

2004 Q1 2004 Q2 2004 Q3 2004 Q4 The centre of Vilnius,

Old Town, Uzupis 1128 1270 1270 1369 Prestigious districts 893 893 893 973 Residential districts 659 681 681 705 Other districts 483 500 500 544

Price, Euro/[m.sup.2]

Quarter

2005 Q1 2005 Q2 2005 Q3 2005 Q4 The centre of Vilnius,

Old Town, Uzupis 1635 1831 1947 2188 Prestigious districts 1215 1408 1511 1730 Residential districts 798 941 1086 1138 Other districts 664 745 865 881

Price, Euro/[m.sup.2]

Quarter

2006 Q1 2006 Q2 2006 Q3 2006 Q4 The centre of Vilnius,

Old Town, Uzupis 2558 2663 2727 2824 Prestigious districts 1963 2018 2000 2035 Residential districts 1307 1339 1332 1347 Other districts 1057 1103 1113 1166 Note: Table made from line graph. Figure 3. Differentiation of dwelling prices in the center of the city and in the prestigious districts

Price, Euro/[m.sup.2]

Quarter

2004 Q1 2004 Q2 2004 Q3 2004 Q4 newly-built dwellings in

the center of Vilnius 1212 1448 1448 1563 renovated dwellings in the

center of Vilnius 1149 1158 1158 1346 non-renovated dwellings in

the center of Vilnius 876 963 963 1028 newly-built dwellings in

prestigious districts 829 941 941 1001 renovated dwellings in

prestigious districts 985 999 999 1001 non-renovated dwellings in

prestigious districts 117 717 117 792

Price, Euro/[m.sup.2]

Quarter

2005 Q1 2005 Q2 2005 Q3 2005 Q4 newly-built dwellings in

the center of Vilnius 1995 2352 2487 2627 renovated dwellings in the

center of Vilnius 1695 1665 1803 2154 non-renovated dwellings in

the center of Vilnius 1201 1364 1426 1502 newly-built dwellings in

prestigious districts 1242 1490 1623 1977 renovated dwellings in

prestigious districts 1339 1400 1444 1683 non-renovated dwellings in

prestigious districts 1002 1123 1261 1303

Price, Euro/[m.sup.2]

Quarter

2006 Q1 2006 Q2 2006 Q3 2004 Q4 newly-built dwellings in 3258 3270 3439 3729

the center of Vilnius renovated dwellings in the 2444 2613 2661 2661

center of Vilnius non-renovated dwellings in 1714 1846 1846 1846

the center of Vilnius newly-built dwellings in 2347 2414 2426 2492

prestigious districts renovated dwellings in 1852 1880 1878 1883

prestigious districts non-renovated dwellings in 1490 1592 1553 1553

prestigious districts Note: Table made from bar graph. Figure 4. Differentiation of dwelling prices in residential and other districts

Price, Euro/[m.sup.2]

Quarter

2004 Q1 2004 Q2 2004 Q3 2004 Q4 new-built dwellings in

residential districts 724 731 731 773 dwellings in large-scale houses

in residential 553 572 572 587 dwellings in brick houses in

residential districts 628 637 637 660 newly-built dwellings in other

districts 510 510 510 565 standard dwellings in other

districts 402 413 413 471

Price, Euro/[m.sup.2]

Quarter

2005 Q1 2005 Q2 2005 Q3 2005 Q4 new-built dwellings in

residential districts 888 977 1090 1219 dwellings in large-scale houses

in residential 656 817 997 1047 dwellings in brick houses in

residential districts 771 941 1064 1125 newly-built dwellings in other

districts 707 772 886 949 standard dwellings in other

districts 591 652 780 844

Price, Euro/[m.sup.2]

Quarter

2006 Q1 2006 Q2 2006 Q3 2006 Q4 new-built dwellings in

residential districts 1330 1360 1367 1390 dwellings in large-scale houses

in residential 1220 1237 1215 1210 dwellings in brick houses in

residential districts 1278 1297 1302 1318 newly-built dwellings in other

districts 1013 1076 1088 1151 standard dwellings in other

districts 997 1105 1120 1068 Note: Table made from bar graph.