Survey: bank loan or down payment does not scare people – the hardest part is about choosing a home

As expectations grow, it becomes increasingly difficult to choose a home

Almost half (47%) of the survey participants stated that the hardest stage in the housing purchase process was the very first one, i.e., the search for good housing. Meanwhile, just 39 % found it difficult to build up a down payment amount. One in four residents faced challenges in handling the necessary formalities as well as equipping their housing. Also, when buying a home, it is the easiest part for residents to self-assess their capacities. For about half of the population, this is no problem.

“The market dynamics in Lithuanian cities lately make the search for housing a real challenge for residents. On the one hand, many new projects are being developed in the capital or Kaunas. On the other hand, given the high demand, apartments are bought up quite fast. Furthermore, people are raising requirements for quality of housing, i.e., prospective buyers are looking for the housing that best suits their needs, thus, they do not tolerate shortcomings or compromise on design space, quality of furnishing, layout, or surrounding environment,” notes Jurga Vilkenė, Head of Real Estate Marketing and Sales, YIT Lietuva.

Wanting more information on territorial development

The survey also shows what missing information is most needed by residents when purchasing housing. Many residents are found to be concerned about the further development of the area around the chosen housing, i.e., upcoming projects, infrastructure changes, the height of new buildings. Half of the prospective buyers of housing are missing such information. For other 41 %, there is a lack of technical information about housing, such as quality certificates or technical drawings.

“Residents have learned from cases where residential housing projects are developed with complete disregard for people's needs, and areas around a house are restored in such a way that there is no space for children's playgrounds or recreational zones. Residents are now also aware that both the price of housing and price growth prospects largely depend on the development of the surrounding infrastructure. Therefore, when purchasing real estate, residents are trying to find out about further development plans for the area, but do not always know where to find such information. It is usually published on municipal websites,” says Jurga Vilkenė.

Lithuanians become increasingly skilled at buying housing

Further, the survey has shown that a quarter of population would like to better examine housing purchase and financing contracts before signing them. Other 16 % of respondents are missing more detailed information on housing prices. People need assistance mostly in finding out what actions and when to do when buying a home. This issue was mentioned by 44 % of survey participants. About a third of the population would like help in negotiating loan terms with a bank.

Žydra Rakauskaitė, Head of Housing Financing at Swedbank, notes that residents recently show more interest for housing aspects beforehand and spend more time examining the financing terms offered by the bank and other housing purchase issues. As a result, there are fewer worries or questions when signing a housing loan agreement.

"We try to provide all relevant information and advice to residents as clearly as possible. At the same time, we observe an improvement in the financial literacy of population. For many, a housing loan is no longer something incomprehensible or unusual and, hence, residents are increasingly taking many steps to purchase a home on their own. Our available data show that competent advice and counselling is still extremely important for residents when buying a home. That is why we pay a lot of attention thereto,” says Ž. Rakauskaitė.

One of the major steps is self-assessment of capacities

The bank representative notes that a housing financing process is not as complicated as it may seem at first glance. People, therefore, should show interest themselves and not be afraid to ask questions to bank employees so that no uncertainties are left.

“The experience of our clients also shows that the hardest step is to choose a home. After the step is taken, the process is usually quite quick and straightforward. Many actions are taken by clients on their own, and the engagement of a banker is only necessary when making a decision on lending terms, as well as clarifying them in detail before signing a housing loan agreement,” says Ž. Rakauskaitė.

In fact, as she acknowledges, it is always important for residents, seeking housing through a loan, to assess their capacities objectively, and this is not always easy.

“You should take into account not only your current financial condition, but also to think about the future, consider various possible scenarios, for example, what would happen if the household income suddenly decreased. Before considering signing a housing loan agreement, we would suggest trying to defer a future loan instalment for several months in a row and see whether it causes big inconvenience. It is also important to think about ways of saving. This would allow to continue enjoying a quality life in case of unplanned expenses or an unexpected decrease in income, without making the assumed obligations a financial burden,” notes Ž. Rakauskaitė.

At the initiative of YIT Lietuva, the research company Norstat conducted the survey of the Lithuanian population in January-February of this year. The survey involved 500 Lithuanians over the age of 18 who purchased housing in the last five years.