Tomas Žiaugra, Head of the Development Department at Eika:
Vilnius’ new housing market has been shrinking since the second quarter of 2021: during the first three quarters of 2022, 67% fewer homes were sold than during the same period last year (1,858 apartments compared to 5,611), and the results of the last quarter returned to the level of 2012. However, the demand for new housing in Vilnius, as shown by the secondary market, remains high – the number of people living in the capital is growing and their incomes are still growing. But the market recovery is being hindered by worrying signs on the global economic horizon and falling expectations of residents. Both developers and home buyers are at a crossroads: some have to decide on new projects while closing their eyes to the uncertain construction price, while others have to decide on a purchase, paying more attention to the developer’s reliability and project risk management. It seems that the record prices of energy resources will not allow buyers to breathe during the cold season, which will most likely mean that market recovery can be expected as spring approaches.
Optimism is inspired by the secondary housing market, which, when comparing 2021 and 2022, has shrunk by only 10 percent in the first 9 months. This behavior of buyers is mainly influenced by the lack of newly built apartments, and the prices of new apartments seem to be record high. In addition, there are cases in the market where even the price recorded in the preliminary contract is not final for the buyer. The question arises, why then would a client rush to make a decision to choose housing that will be built in a year, and the developer does not even guarantee the agreed price? In the projects it manages, Eika, creating faith in the market and ensuring the unchanged terms of the preliminary contract, offered customers the opportunity to choose an apartment now and make a final decision in the spring by terminating the preliminary purchase contract without any penalties and withdrawing the entire deposit if the decision changes.
Despite the decreasing demand, the number of vacant apartments on the market is increasing very slightly. The still growing construction costs and long building permit issuance processes mean that the number of new housing on the market in Vilnius increased by 7.4 percent in the third quarter to 2,620 vacant apartments, but this is as much as 9.7 percent less than the number of vacant apartments on the market a year ago (2,900 apartments).
The annual growth in the price of new apartments in October 2022 reached as much as 30.5 percent. threshold, which shows that new housing in Vilnius has increased in price by an average of 765 eur/sq m. per year. from 2515 eur/sq m. in October 2021 to 3280 eur/sq m. currently. Although we observed price stabilization in August-September, new projects launched in September on the market again raised the overall average price.
Facts
- Only 280 apartments were sold in the third quarter of 2022. The result of the quarter is 53 percent lower than the second quarter of 2022 (598 apartments) and even 80 percent lower than the third quarter of 2021 (1,386 apartments).
- Comparing the first three quarters of 2022 (1,858 apartments) with the corresponding period of 2021 (5,611 apartments), the trends are similar – 67 percent fewer apartments were sold than last year.
- The most popular housing types in the third quarter of 2022 were middle-class – 56 percent of apartments sold (156 apartments), economy-class apartments (103 apartments) accounted for 37 percent of sales, and only 7 percent of apartments sold during the quarter were luxury housing (20 apartments).
- During the quarter, the number of economy-class housing buyers decreased the most – by as much as 70 percent, while middle-class sales decreased by 30 percent during the quarter compared to the second quarter of 2022. Prestige-class sales decreased by 33 percent during the quarter.
- During the third quarter of 2022, the number of vacant apartments on the market increased by 7 percent and currently stands at 2,620 vacant apartments on the market, compared to 2,440 in the previous quarter.
- During the quarter, the share of completed and under-construction apartments on the market increased from 14 percent to 19 percent (505 apartments), while the remaining 81 percent (2,116 apartments) are visible only in drawings.
- During the quarter, the number of vacant apartments changed the most in the prestigious class segment – it increased by 42 percent (to 156 apartments), in other segments the number of vacant apartments increased by 9 percent (to 1,185 apartments) in the middle class and by 3 percent in the economy segment (just 1,280 apartments).
- During the third quarter of 2022, developers offered about 460 new apartments to the market, which is 31 percent less than the previous quarter (670 new apartments).
- During the third quarter of 2022, the price of new apartments in Vilnius grew the most in the economy segment – as much as 12.6 percent, in the medium and luxury segments prices grew by 2.0 percent and 6.9 percent, respectively. The price level currently reaches 2,800 eur/sq m in the economy class, 3,480 eur/sq m in the medium class, and 4,910 eur/sq m in the prestigious class.
- Due to the above-mentioned price changes, the total average price of new housing in Vilnius grew by 11.8 percent per quarter: from 2,940 EUR/sq m in July to 3,280 EUR/sq m in October 2022. And the annual growth over 4 quarters reaches as much as 30.5 percent.