The luxury real estate market is in the hands of a seller nowadays. A demand for premium objects is the highest ever, but the selection has shrunk to the minimum, says Robertas Karalius, a representative of Baltic Sotheby’s International Realty, having demonstrated the best results in the Baltic states last year.
The luxury real estate market in Lithuania is much smaller than usual and much more concentrated. Apart from suburban residences in picturesque areas of Lithuania, objects of this segment line up in seaside resorts and prestigious neighbourhoods of Vilnius and Kaunas. As paradoxical as it may sound, the price is not the key hallmark of a luxury apartment or a house.
“The usual measure of real estate – the price per square meter – does not matter in the luxury market. The benchmark here always is an answer to the question why this object is exceptional, what makes it unique and what needs of the buyer it would meet. These are the main levers that determine the transaction value. Luxury real estate is more about exclusivity and emotion rather than square meters and price,” says R. Karalius, who has been specializing in the luxury property segment for eight years now.
And yet, numbers are always interesting. Is there any range in the luxury real estate market?
The price of a luxury home could start from 150 000 euros. A small apartment-studio in the Old Town of Vilnius, in a historic house, would be a perfect example of this price range. And the ceiling of the transaction value in our market usually hits about 3 million euros.
Pinpointing the size of the luxury real estate market is hard, as many criteria, such as a view through the window, the space, the neighbours, the history and the like, that are not reflected in the statistics play an important role in the market. Imagine a wonderful apartment in the heart of the Old Town. However, if it has problematic neighbours, it no longer is a luxury segment. Therefore, it is difficult to determine the size of the market filtering objects by price only. According to our estimates, in terms of the number of transactions in major cities of the country and the seaside, this segment accounts for up to 5% of the entire market, and it is even smaller nationwide.
What are the criteria which a property should meet for it to be considered luxury?
If we were to talk about apartments in the city center or the Old Town, the windows should offer great views – the panorama of the city, the roofs of churches and the like. Such property should have an outdoor space – a balcony, a terrace or, if they are not available, a comfortable inner yard or a nearby park. In order words, in addition to high-quality interior, the property must also have a space outside. When it comes to the interior, the main measure of luxury is the height of the ceiling. Three meters or more creates an exceptional sense of space.
These three criteria have been around for a long time and will never go out of style.
Does Lithuania stand out from other countries in terms of these criteria?
Infrastructure of the exterior with additional amenities, such as a gym, a swimming pool, a café, children playgrounds and office spaces, has not been that important in Lithuania so far, but it is very popular around the world and is inseparable from the perception of a luxury property. A concierge is also rare in our market and does not perform exactly the functions he should. Traditionally, a concierge is a person who takes care of all life issues while the landlord spends time elsewhere. His duties include watering flowers, receiving parcels, arranging room cleaning and the like.
This position is very important in foreign metropolises. For example, it is hard to imagine a property without a concierge and amenities in Miami. So far, developers are cautious of starting to invest in these things in Lithuania, but I think we should see more of such infrastructure around in the near future, especially in light of the fact that people have started using their second home more intensively, the time spent there has become much longer. People understand that comfort is not just about a quality apartment, but also about what is outside of it.
And what are the preferences of buyers of individual houses?
When buying a house, the environment, the surrounding nature and the landscape play a very important role. Privacy is also very important because people usually decide to buy a house to have a large private space and a yard. I am not saying there should be no one around. Very few people want to live in isolation, but the neighbourhood should be good and at a decent distance so that neighbours do not look straight through your windows.
I would single out houses outside of the city, in picturesque places, usually on lake shores, as a separate segment. I call them a suburban residence. Usually these are not homesteads, but rather modern properties intended for permanent living. Location is very important here. The most demanded places like that are near Vilnius, with one of the most picturesque options being next to Lake Asveja, which can be conveniently accessed from several sides. Trakai with its many surrounding lakes is another popular location. The boom in buying such homes has subsided considerably since 2007-2008, but now the interest has been growing back up for several years. Unfortunately, the supply has shrunk significantly.
You say nothing about the interior, the technologies that a property is equipped with. Why is that?
The way a property is equipped is far less relevant, as it can be changed easily. A special place, a valuable architecture is much more significant because it is unique. The interior is the easiest to transform, while installing the history, the location, the view from the balcony is impossible. Basically, in order to have the latest modern technology, materials and engineering, a property should be renovated every five years.
If we talk about the fashion of installation and technology, there is a lot of interest in green solutions. Solar panels, electric car charging stations, eco-friendly building materials and similar things are now highly valued, and this is quite new in this market.
Today buyers want a property, where they can either live right away or after making minimal cosmetic repairs, and this is true of apartments, houses and homesteads. The crisis in the supply of materials and shortage of human resources has made installing properties quite complicated both in terms of time and money. However, the supply of properties which can be bought and used right away is extremely small. Demand in the market of exclusive real estate objects today is significantly higher than the number of properties for sale. This is the situation all over the world. Our colleagues from the United States say that both real estate agents and the market are currently facing challenges everywhere.
The seaside traditionally associates with holiday accommodation. Is it thriving now?
The seaside is now a highly desired location. Many people want to have property there, luxury projects are developed, and with each new buyer of property, more services and infrastructure are developed, which in turn attracts new people. We have observed that people spend increasingly more time at the seaside. They not only go there on vacation, but also live there, returning to big cities from time to time to get things done.
Such lifestyle has long been established around the world: if a family has business focused in New York, usually this is not where the main family home will be. They live somewhere in a quieter, more picturesque, resort-like location. The so-called holiday home becomes the principal residence, an oasis, while having a work base, a comfortable apartment or a house to spend a night at in a metropolis. So far, the lion’s share of investments in Lithuania has been spent on purchasing the main place of residence in the city, having a slightly smaller one in the resort. But that has been changing dramatically.
I would single out Neringa at the seaside as a unique place of great interest. The status of a UNESCO heritage site prohibits new construction there, so the number of potential property objects in Neringa is very limited and has rapidly been declining. For example, there are five vacant apartments only remaining in the Golden Dunes in Nida (Baltic Sotheby’s International Realty is the representative of this real estate object, which is considered the most luxurious in the Baltics – author’s comment), although construction works are still in progress. When it comes to the longevity of property in terms of price and the limited supply, I would equate Neringa to Vilnius Old Town.
When we talked about this project in Nida, you mentioned that people of all ages are interested in it, and this is a relatively new trend. Are buyers of luxury properties getting younger?
I would say the portrait of a buyer is what changed the most in the luxury segment over the past decade. Previously, buyers of such objects were well-known owners, founders or managers of the largest companies in the country, and now a buyer is much younger. Start-ups, developers of IT companies enter this market, and their decisions in search of luxury property are much bolder. The pace of their lives is intense, they attach much more importance to their home space, they want it to be high quality, functional, luxurious, to meet their individual needs, they are looking for a home where they can truly revive.
Where do you start your conversion with potential buyers? The budget, their needs?
If people are rich, they probably won’t have a clear budget, simply looking for the right property to meet their needs. In order to find such a property, getting to know a person and having a good knowledge of the market itself is very important. So, we start with a conversation about the buyer himself, his family, their normal day, travelling habits, finding out who drives children around, whether parents or other people often come to stay with them, and similar things. First questions usually do not concern real estate or square meters, as they do not reveal much.
Having a clear enough picture of the buyer and feeling the pulse of the market allows to name the budget so that expectations are realistic, looking for compromises, if necessary. However, it is very important to know where compromises can be made, what is unquestionable and what is an object of discussion. For example, if the buyer wants to have two hundred square meters at the city centre, but it is obvious that the price of property of high quality will be too high for him in such a place, then we can question if the property really has to be in the old town, if the main criteria is having a large space.
By knowing this specific market, we can show customers around realistic choices and help them find the best property in less than two, three, or five years, as often is the case when searching on portals.
So luxurious homes should not be sold online on real estate ad portals?
You can do that, but this is one of the channels only. Moreover, a sale starts well before an ad appears. Luxury property cannot be sold carelessly, just as luxury cars should not be sold in Rietavas market. Personally I create a sales plan for each real estate object, which is very individual. Professional photos only may be enough for one object, while another property may require cosmetic repairs or corrections. To be able to do your homework well and to provide an attractive offer to the market, feeling its pulse and having the right tools, such as marketing solutions, international channels, video advertising opportunities, etc., is very important. Owners cannot know these things better than a professional, and this is absolutely necessary to sell a property at the maximum price. I can hardly imagine a luxury real estate deal without the help of an agency.
How is the price of a luxury property set? It should not be easy to price something which often has very few alternatives.
The fact that it is difficult to compare with usual transactions and to evaluate based on their prices, as in the normal real estate market, is what makes luxury real estate unique. The price and its justification in negotiations with the buyer is one of the biggest challenges. When there are no alternatives, there is nothing to rely on in making calculations.
We take a broader approach, looking who could the buyer of such property be sand what needs that property meets. Could an apartment in the old town with a terrace of a hundred square meters and postcard views be an alternative to a house? Another rarer but yet very popular niche is penthouses. There are people all over the world who dream of living on the top floor of a building with a private elevator, terraces and a panoramic view of the city. So, if a person can spend a million and a half on a house somewhere in Antakalnis or Valakampiai, and is ready to consider a penthouse as an alternative, this means that an apartment can also cost a million and a half, although they may seem to be completely different options.
Therefore, exclusive characteristics of a property, the sum which the buyer is willing to pay for such exclusivity and the emotion it evokes are the key factors when setting the price of a luxury property. I had more than one seven-digit deals, when people bought an apartment to live in the old town without a parking lot, which nowadays is a factor of hygiene, but they acquired an apartment in a historic house with high ceilings, great views through the windows and large balconies. And here the only, but yet unique, feature can be the deciding factor in buying the property and determining its price.
You also own the record for the biggest deal – you sold a holiday home at an unprecedented price a few years ago.
Yes, this is one of the most memorable cases in my practice. A seaside villa with the highest sales price (which, as far as I know, still is the highest) in the second property market segment – the buyer paid well over 2 million euros for this holiday home. There was no analogue to the price, all comparable transactions were a few times lower. We set the initial price looking into future prospects and immediate alternatives, but the negotiation process was difficult. We found the right buyer rather fast, but the deal took almost a year due to preparation, gathering of the necessary documents and other formalities. However, the most exciting part about the deal was its successful completion, leaving both sides happy.
How long does selling a luxury property usually take?
The buyer is usually found within three to six months, while preparation for the transaction and documentation of a sale may taken another two months.
Another specific feature of this market is returning buyers. After all, how many times can you buy and sell property in Justiniškės neighbourhood? Are transactions concluded by a single customer more frequent in the luxury real estate segment?
Definitely yes. Here customers become long-term partners, and we stay in touch with them for good: having sold a property, they look for something to buy. And if there is nothing available at the moment, something of interest may show up on the market later on. Like art collectors, rich people are constantly looking for interesting valuables. Sometimes a unique object is offered on the market which you simply cannot afford to miss, because another opportunity like this may never come around.
I once sold a building overlooking the Presidential Palace, which was a part of a historic complex, to an investor. How many years will it take for such an object to appear on the market – a house in Daukantas square? Either you buy it or not. If you miss the opportunity, you may have whatever budget you want, but such a chance will never repeat. That’s what makes this market interesting, because sellers and buyers are the same, and you become their partner advising on what is going on in the market, what is worth buying, and what should be sold.
Agents in this segment are also different. Here you cannot show up saying, well, starting today, I will work with luxury property. In addition to experience and knowledge of the real estate market, this field requires much broader competencies and understanding of many things that are not even related to real estate, including law, marketing, the art of negotiation, also the ability to see everything through the eyes of the buyer and the seller, to understand how such people live, how and why they buy. I am glad to work under the flag of the international company Baltic Sotheby’s International Realty. We get all the materials, trainings, reviews from New York, which allows us to keep pace with the world. The U.S. already has an established luxury property market, and this is where standards spreading around the world come from. This segment is very similar everywhere, especially when it comes to the portraits of the buyer and the seller, although nationality, budgets, markets themselves and real estate prices are, of course, very different.
Do customers often surprise you?
Each transaction is a separate story, with its own lessons and morals. I had a case where people were looking for a 130-square-meter apartment in the old town, which would be arranged on one storey. That was the essential condition. I adhered to these criteria very strictly, looking for an ideal option for a long time, but to no avail. One day I received a call, saying: Robert, we have just cut a deal! Sure, I expressed my congratulations and asked where they managed to find the property, how come I missed it. The customer explained that they bought a townhouse in the old town. But it was a four-storey house, I said with surprise! It turned out that alternatives, a much larger area, made them change their minds. Such cases are the best experience and a lesson that inquiring about the lifestyle, the family, hobbies and plans rather than about features of a property is the key to successful deals. I would recommend starting with these things to all those looking for a property to buy. Do not strictly rule out any options, stay positive in your search, have your eyes wide open, and find the home of your dream.
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