Insight
EIKA General Director Domas Dargis:
The first quarter of 2020 in the Vilnius housing market recorded similar results on average to the entire year 2019 – 1,390 apartments were reserved and sold. However, the statistics hide behind the numbers not only the extremely active months of January and February, when records were broken and sales reached as much as 660 apartments per month, but also the month of March, which was hit by a general quarantine, when almost all transactions in the market were recorded during the first 10 days of March and there were only 140 of them, or about 80 percent. less than the average for the previous months.
Looking at the events of March in more detail, we note that the last two weeks of March, when the quarantine was announced, were a shock to the market – the limited work of notaries, the increasingly strict quarantine conditions and the uncertainty that gripped the country forced all market participants to stop. Developers are urgently reviewing their plans and re-evaluating the possibilities of completing the projects they have started. Buyers, in turn, are assessing resources and future prospects. The fact that there is no rush to make hasty decisions and terminate preliminary contracts or cancel reservations shows the maturity of the market and is positive. Even in the entire market, the cancellation of reservations, which are usually free of charge, is minimal – out of 150 projects, only five projects have released more than two apartments from those already reserved.
Currently, there are about 3,620 vacant apartments in the Vilnius housing market – 17 percent less than at the same time last year. In the current conditions, this is a favorable factor, as the market is not overcrowded. Of the vacant apartments on the market, 1,100 are completed or in the process of being completed – the developers of these apartments will no longer face challenges in completing the project, as will the clients due to the timely completion of the housing purchase transaction. On the other hand, about 2,520 apartments are in the midst of construction and their builders will have to take additional measures to ensure that construction financing does not cease and that obligations to customers are fulfilled.
It is currently difficult and probably irresponsible to predict the nearest housing price trends. This will depend mainly on how long the quarantine and the uncertainty surrounding it will last, and how the position of banks will change in continuing project financing and, most importantly, in new financing for housing buyers. Currently, the average market price in Vilnius has reached its peak due to inertia since 2018 – 2170 eur/sq m or an annual growth of 7.5%.
How the market will manage to survive the shock will depend on how each market participant – customer, bank, developer, builder – behaves responsibly and makes only rational decisions focused on a quick recovery.
Facts
- In the first quarter of 2020, 1,390 apartments were sold in the primary housing market of Vilnius, which is 6 percent less than in the first quarter of 2019 (1,470 apartments), but 17 percent more than in the fourth quarter of 2019 (1,190 apartments).
- The largest share of transactions was made up of middle-class sales – 47 percent of transactions, followed closely by the economy class – 42 percent of transactions, and 11 percent of sales were in the luxury housing segment.
- The amount of unsold housing decreased by 16.7 percent over the year and currently stands at 3,620 vacant apartments.
- About 30 percent of this warehouse consists of completed and under construction apartments, and 2 out of 3 apartments for sale, or 70 percent, are in the midst of construction.
- In the first quarter of 2020, real estate developers offered 1,100 new apartments to the market, i.e. 8 percent less than in the first quarter of 2019, when construction and sales of 1,190 apartments began.