...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...

NOTE: All illustrations and photos have been removed from this article.



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