Insight
Tomas Žiaugra, Head of the Development Department at Eika:
After the ecstasy and rush to catch the train in 2021, in 2022 the housing market was thrown back to the sales volume of 2013: in 2022, 2,253 apartments were sold in Vilnius (in 2021 – 6,888 apartments), and the results of the last quarter seemed to show signs of recovery, but ended the year with record low sales, which barely exceeded 20 apartments sold in December 2022. In 2022, challenges followed challenges, shaking the real estate market anew every quarter – the war that had begun, uncontrolled inflation, record energy prices and finally sharply increased interest rates severely limited the ranks of customers for new housing. Although the demand for housing in Vilnius, as shown by the secondary market, remains high – according to preliminary data, the secondary housing market has shrunk by about 15% – the number of people living in the capital is growing and their incomes are still growing.
Developers are also monitoring the situation and trying to adapt to it. The last quarter of the year was marked by promotions, gifts, and sometimes “off-the-shelf” discounts, which could not be expected in the housing market for the last couple of years, but this did not have a significant impact on sales promotion. The housing market is a market of expectations, and currently potential home buyers simply do not know what their expectations are, what a good price is, and why it is worth making a decision today.
Despite the declining demand, the number of vacant apartments on the market is not growing rapidly – over the year, the number of vacant apartments increased by a fifth and reached 2,850 apartments, which, historically speaking, is not a large “storage”. The still growing cost of construction and the long processes of issuing building permits mean that the number of new housing on the Vilnius market is growing slowly, but there is a clear trend that more and more apartments with a higher degree of completion are appearing on the market. Last year, only 1/10 of the apartments could be viewed live, and currently 29 percent of unsold apartments on the market are entering the completion stage. This means that with each month, especially for smaller or expensively borrowed developers, the pressure on unsold housing will increase.
The annual price growth of new apartments at the end of 2022 reached 23 percent. threshold, which indicates that new housing in Vilnius has increased in price by an average of 630 EUR/sq.m per year to 3340 EUR/sq.m at the end of 2022. The last quarter of the year shows that price growth has leveled off – only 1.8 percent. overall price growth was recorded, and it seems that next year we may see price corrections for individual projects, which will also affect the overall market price trend.
It seems that in 2023, buyers will finally have the opportunity to choose, and not just rush to sign a contract at the earliest possible stage of the project, which has been the case for the last few years. Developers used 2022 to prepare, obtain building permits, so that they could offer various products to the market in the coming year. It is obvious that in 2023 the scales will tip in the buyers’ favor, but agreements between buyers and sellers will have to be found so that the market is viable and developers have a reason to start with new projects.
Facts
- Only 395 apartments were sold in the fourth quarter of 2022. Although the quarterly result is 42 percent higher than in the third quarter of 2022 (279 apartments), it is as much as 69 percent lower than in the fourth quarter of 2021 (1,277 apartments).
- Comparing 2022 (2253 apartments) with 2021 (6888 apartments), 67 percent fewer apartments were sold than last year.
- The most popular housing types in the fourth quarter of 2022 were middle-class – 77 percent of apartments sold (304 apartments), economy-class apartments (55 apartments) accounted for only 14 percent of sales, and only 9 percent of apartments sold during the quarter were luxury housing (36 apartments).
- Annual trends differ slightly. Almost the same amount of economy and middle-class housing was sold in 2022 – 47 percent each (1,058 and 1,064 apartments), while luxury housing sold only 6 percent (131 apartments).
- During the quarter, the number of buyers of economy-class housing decreased the most – 47 percent, middle-class sales increased by 95 percent during the quarter compared to the third quarter of 2022, but this was due to the implementation of individual projects for investors, and not a sustainable recovery of this segment. Sales of the prestigious class also increased significantly during the quarter – by 80 percent (from 20 to 36 apartments sold).
- During the fourth quarter of 2022, the number of vacant apartments on the market increased by 9 percent and currently stands at 2,850 vacant apartments on the market, compared to 2,620 in the previous quarter.
- The annual change in supply is slightly higher – 21 percent. At the end of 2021, there were only 2,350 vacant apartments on the market, compared to 2,850 currently.
- During the quarter, the share of completed and under construction apartments on the market increased from 19 percent to 29 percent (814 apartments), while the remaining 71 percent (2,035 apartments) are only visible in drawings or in the midst of construction.
- Over the course of a year, the share of completed and ongoing projects in the market increased from 12 to 29 percent, and growth was recorded in all four quarters of the year.
- During the quarter, the number of vacant apartments changed the most in the prestigious class segment – it decreased by 24 percent (to 118 apartments), in other segments the number of vacant apartments increased by 11 percent (to 1,318 apartments) in the middle class and 10 percent in the economy segment (only 1,413 apartments).
- During the fourth quarter of 2022, developers offered about 848 new apartments to the market, which is 84 percent more than in the previous quarter (460 new apartments).
- During the fourth quarter of 2022, the price of new apartments in Vilnius grew the most in the economy segment – as much as 6.9 percent, in the average segment the growth reached 2.8 percent, in the luxury housing class a 2.0 percent price decrease was recorded. The price level currently reaches 3000 eur/sq m in the economy, 3570 eur/sq m in the average and 4820 eur/sq m in the prestigious class.
- Due to the above-mentioned price changes, the total average price of new housing in Vilnius still grew by 1.8 percent per quarter: from 3,280 eur/sq m to 3,340 eur/sq m at the end of 2022. And the annual growth for 2022 reaches as much as 23.3 percent.