2020/07/15
“The lockdown affected us like all other businesses: house hunting and apartment sales ground nearly to a halt. Before the lockdown, we accepted pre-orders for an average of 30 to 35 apartments per month compared to just 2 or 3 apartments in March and April. We should assess this situation with reason as it was only natural that people started to prioritize their health over housing, clothing or domestic appliances while facing this previously unknown threat. We did not take any action during that period as it would have taken us nowhere. Meanwhile, in May and June we managed to sell 14 apartments. I think it is a rather good result. One argument is that it takes time to recover after this kind of shock, and we should also consider the fact that our housing portfolio in the capital city includes approximately 70 apartments”.
“Every developer was in a different situation when this crisis took hold. Our two projects, Linkmenų Ežerai and Žvėryno Panoramos, had already been completed and almost all apartments had been sold by the time the crisis hit us. We had signed around 600 preliminary agreements and none of them was terminated. We did not request down payments which often amount to several thousand euros. We offer down payments of 10% of the apartment selling price. Today we have only one unsold apartment in Linkmenų Ežerai project, and the remaining unsold units are in Žvėryno Panoramos.
We have not used any external financing for our real estate development projects – all investments were made from our own funds. A large portion of our residential property transactions had been completed by the time the lockdown was announced, thus, our investments generated profit as planned.”
If your residential property portfolio in Vilnius includes 70 apartments, perhaps you face a different kind of problem, i. e. a dilemma of whether to build new apartment buildings.
You are completely right. Incidentally, with such portfolio, our results for the year 2020 will be a far cry from being impressive. We are now working hard to obtain building permits for our projects. This primarily concerns our Septyni Vakarai project in Pašilaičiai (280 apartments). We also expect to receive clearance for our Prie Vilnelės project in Markučiai offering 220 apartments in the third quarter of this year.
Are you planning to commence the construction of 500 apartments all at once?
We are re-assessing our plans on a weekly basis. Currently, our preliminary strategy is to commence both projects all at a time. With Septyni Vakarai, we have the option of breaking down the project into two stages. We will start out by launching the construction of 120 apartments and we will then see whether the project attracts a desired level of interest.
Meanwhile, our apartment buildings in Markučiai cannot be technologically divided into stages, thus we will proceed with the project all at once. Of course, we will reassess the situation once we get the required permits. I hope we will be able to green light our developments, especially given the fact that our financial situation allows us to commence these projects without securing any pre-sales like we did previously. I think that we will not return to that level where we used to sell 20 apartments as soon as we dug a hole on the site. We will be patient and we will proceed with construction hoping that the situation will be improving with each passing month and that our sales will catch up with our pace of construction.
Could you tell us more about the factors that have made you arrive at these developmental decisions? What future demand do you anticipate in Vilnius, especially given the post-pandemic circumstances?
The results for the previous two months show higher levels of optimism in the residential apartment market. I think we could rebound even more in a month or two. Statistics only record past results. Real estate projects are long term projects; thus, we should make predictions one step into the future and make best guesses.
We are not looking at the situation at a micro or local scale. We are
definitely keeping an eye on real estate market sentiment and trends but, what
is even more important, we are focusing on Lithuania’s macroeconomic prospects,
predictions and estimates. The word is out that the second quarter will show
the worst results and recently there have been talks about a possible rebound
in the third quarter. We are yet to see the exact rate of recovery as each
segment is responding differently. One soft sign may be the fact that the
ascetic period has left people longing for face-to-face interactions and the
restaurants are showing signs of recovery. Maybe this sector will witness a
more rapid recovery than the real estate or auto industry as they produce
things you can do without for a longer period.
Our clients are the residents of Vilnius. If things go well for them and they feel that everything will be fine, we will also experience a boost in our apartment sales. Thus, we are keeping an eye on the corporate sector, whether the businesses are meeting their payroll commitments and whether they are returning to the pre-pandemic levels. Everything is very simple: if businesses have a healthy flow of orders, if they sell their products and report good results, it means that their employees, who are our customers, are also doing great.
You have talked about your two upcoming projects. But there are many more in your portfolio. Perhaps you will keep them in store for a while?
Besides the two developments we have already discussed, another one is projected to be built at Algirdo Street in Naujamiestis. We are now in the process of selecting architects who will shortly commence their design work.
We also have a small property development at Mildos Street in Antakalnis. We have had it for a while now, just as the recreational and residential housing project in Ozas Park. For both projects, we first need to wait until the new general plan of Vilnius sees daylight. These are our future plans at Realco.
As
for our supply forecasts, we are currently working on 1,400 apartments. We will
take up construction only if economy shows upward trends.
To learn more, please visit: https://www.vz.lt/nekilnojamasis-turtas-statyba/2020/07/15/realco-vadovas--apie-ideja-nebepardavineti-butu-is-breziniu#ixzz6XNIymYkA