Insight
EIKA Development Director Martynas Žibūda:
“It would be difficult to imagine a more contrasting year than the past 2020 in the Vilnius primary housing market: from record heat waves to complete stagnation in the ice. However, it seems that the trials of the Covid-19 pandemic did not have a significant negative impact on the Vilnius housing market in the perspective of the year: in 2020, 4,874 new apartments were sold in Vilnius, or only 14% less than in the record 2019. This result was achieved despite several months of quarantine in the spring, when transactions practically did not take place, but in the last quarter of the year, the historically highest sales were recorded in the Vilnius new housing market, exceeding even the indicators of last year.
It seems that the desire of the population to purchase housing was determined by several aspects. First of all, it is a good economic situation: despite the global health crisis, record amounts of savings have accumulated in Lithuanian accounts. Concerns about possible inflation, which may be caused by the expansionary policy of central banks, were mentioned by customers as another factor encouraging the purchase of housing. The stagnation of banks provoked by the first wave of quarantine, when the issuance of new loans was suspended for a certain period, determined the activity of residents who purchased housing with a loan. The latter were often guided by the principle – “you need to borrow while there is an opportunity and before income has decreased”. Finally, one of the biggest catalysts for the housing market was the rapidly growing prices, which nominally grew by about 5.1% per year, but looking at individual housing segments, middle-class housing became more expensive by about 10%, while economic housing – by almost 12%.
A certain vicious circle has formed, when the existing demand has created even greater demand, because developers, temporarily hesitant due to the impact of the quarantine, did not have time to react so quickly to the changing situation. Not having sufficient supply, they priced all new projects by an average of 100–150 EUR/sq m more expensive. A real estate project is a time-consuming and inert process, so the actions of developers will become more visible next year, 2021. Despite the fact that developers offered almost the same amount of housing to the market in 2020 as last year, sales volumes have not yet reached this level, so the stock of vacant apartments has even decreased and amounted to about 3,800 apartments. Meanwhile, until recently, there was a discussion about whether 5,000 unsold apartments would be healthy for the market.
Seeing the need for more expensive housing, developers focused not only on areas as close to the center as possible – Šnipiškės, Naujamiestis, Užupis, etc., but for the first time in many years they also entered traditional bedroom microdistricts with established public and social infrastructure: new projects were launched in Justiniškės, Viršuliškės, and Šeškinė. The prices of the latter projects are rapidly approaching middle-class housing prices due to the developed infrastructure and despite the greater distance to the city center.
The raging pandemic had a significant impact not only on the volume of the housing market, but also on the nature of the activity: in a very short time, not only developers learned to sell housing remotely, but, most importantly, buyers themselves also matured for it. Considering that the majority (about 70%) of unsold apartments are in the initial stage of construction, the entire transaction process was successfully implemented without physical contact: starting with remote meetings, viewing the housing in a virtual reality project model, ending with contracts approved by electronic signature and further remote client consultations.
Despite the persistent clouds in the healthcare system, the sky for the Vilnius primary housing market should remain fairly bright in 2021. It is important to understand that in the new year, A++ energy class requirements and the infrastructure law will come into force, which will tax each square meter of new housing in Vilnius, depending on the location, from 30 to 50 euros. All this will inevitably increase the price of new housing, but, let’s hope, at the same time the quality of the housing itself and the infrastructure surrounding it – access roads, courtyards and the environment – and in general the attractiveness of Vilnius as a city for residents.
Facts
- In 2020, 4,874 apartments were sold in the primary housing market of Vilnius, which is 14 percent less than in the record year of 2019 (5,660 apartments) and 22 percent more than in 2018 (3,986 apartments).
- The largest share of transactions in 2020 was made up of middle-class sales – 45 percent of transactions, the economy class was not far behind – 42 percent of transactions, and 12 percent of sales were in the luxury housing segment.
- The number of buyers of prestigious housing increased the most during the year – 12 percent: 606 apartments sold in 2020 compared to 539 apartments in 2019. Economy and middle class sales decreased by 10 and 22 percent respectively during the year compared to 2019 to 2,067 and 2,201 apartments.
- During 2020, the number of vacant apartments on the market decreased by just 2.8 percent and currently stands at 3,802 vacant apartments.
- Only 29 of this warehouse consists of completed and under construction apartments, while the remaining 71 percent or 7 out of 10 apartments for sale are still in the early stages of construction.
- The largest decrease in the supply of unsold apartments was recorded in the middle class, where the number of vacant apartments decreased by 17 percent over the year, the supply of housing in the luxury segment decreased by almost 11 percent, and the economy segment increased by 21 percent.
- In 2020, despite the pandemic, similar activity among real estate developers was recorded – 4,763 new apartments were offered to the market, i.e. 3 percent less than in 2019, when construction and sales of 4,930 apartments began.
- In 2020, the price of new apartments in Vilnius grew the most in the economy segment – by as much as 11.9 percent, in the average segment by 10.2 percent, and in the luxury segment it even decreased by 0.7 percent. The price level currently reaches 1,718 EUR/sq m in the economy segment, 2,330 EUR/sq m in the average segment, and 3,101 EUR/sq m in the prestigious segment.
- Due to the above-mentioned price changes and the increased share of economy-class housing in the supply, the total average price of new housing in Vilnius increased by 5.1 percent: from 2,070 EUR/sq m at the beginning of the year to 2,175 EUR/sq m at the end of this year.
