This post was automatically translated into English
Prices of new construction real estate in Kaunas rose sharply by more than 10 percent in April and May.
Prices for new construction real estate in Kaunas rose sharply by more than 10 percent in April and May. This is the largest price jump in the past ten months, as since August 2006, the average price of new construction real estate in Kaunas has increased by only 12 percentage points.
Although the price of newly built apartments in Kaunas is increasing faster than in the capital or the port city, their price still remains the most attractive of all three cities – they are on average 32.5 percent cheaper than in Klaipėda and 14.3 percent cheaper than in Vilnius.
The average price of a newly built apartment in the temporary housing estate in April and May reached LTL 5,777 per sq m. m. and was only slightly higher than the average price of economy-class housing in Vilnius (LTL 5,459 per sq m. m.) and significantly lower than the average price of economy-class apartments (LTL 6,027 per sq m.) in the port city.
Due to such a price disproportion, market analysts are not inclined to divide new construction housing in Kaunas into the so-called middle class, which in other major cities of the country is calculated from (6,000 LTL per sq m) and the prestigious class, reaching over 7,501 LTL per sq m, because the average price in the temporary capital only reaches the level of the economic class (up to 6,000 LTL per sq m) of the other two cities.
Real estate developers in Kaunas are also targeting buyers with more modest financial resources. They offer and buy smaller apartments, averaging 52 sq m, which is eight sq m smaller than in Vilnius and twelve sq m smaller than in Klaipėda.
Despite the price jump, over the past two months, sales of new construction apartments in Kaunas did not stop, as might have been expected, but grew by 6.8 percent. However, this growth was slower than in February and March, when sales rose by 16.29 percent. Despite this slowdown, over the two-month period, the most new construction apartments were sold in Kaunas in the past 17 months.
Moreover, a new market trend in Kaunas is that over the past two months the traditional gap between the number of new-build apartments offered to buyers and the number of apartments purchased has significantly decreased. In April and May, only 2.8 times more apartments were offered in the Kaunas new-build housing market than were purchased. Meanwhile, in the past ten months, the trend in the temporary housing market was that buyers were offered up to thirteen times more apartments than were purchased. This gap began to decrease in the autumn of 2006 and became very pronounced before the summer.
According to analysts, this happened because during this period only one project was offered to the market in Kaunas and buyers simply had nothing to choose from, but the upward sales curve clearly indicates increased buyer activity.
“Kaunas, like Latvia, simply recovered from the market stagnation later, so we are seeing more pronounced market changes now. Compared to Klaipėda, where average prices for new construction real estate have already surpassed Vilnius and reach LTL 8,545 per sq m., Kaunas prices are very attractive, but its growth is a temporary phenomenon,” predicts Viktorija Beatričė Radzevičienė, Development Director of the real estate company “Eika”.
To support her arguments, she also mentions the lower prices of land suitable for construction than in Vilnius and Klaipėda. However, this process can only be stopped by the still emerging and small layer of managers and executives living and working in Kaunas.
According to VB Radzevičienė, traditionally wealthy Kaunas residents who are engaged in small and medium-sized businesses tend to live in their own homes, often even outside the city limits.
“Newly built prestigious housing in Kaunas is not yet a particularly popular product, usually purchased as a second living space, rather than a family home. The latter were historically located in Garliava, or even in the settlements of Paukauna: Vilkija, Vandžiogala or Domeikava. Meanwhile, real estate developers’ earnings from economy-class apartments are lower if individual objects are built, rather than entire residential blocks,” says VB Radzevičienė.