Insight
Tomas Žiaugra, Head of the Development Department at Eika:
After 2022, which was the worst year for the primary housing market since 2013, the market entered 2023 with a much more optimistic outlook: 673 apartments were sold in Vilnius in the second half of 2022, and 642 apartments were sold in the first quarter of 2023 alone. The change in buyer activity is obvious, and we can also see it in the projects developed by Eika, but we are still quite far from balanced market volumes. In the housing market, which grew sustainably, sales fluctuated around 300-400 apartments per month in 2015-2018, when the threshold of 200 apartments is currently barely exceeded. Controlled inflation and lower energy prices are making homebuyers feel a little more stable, but at the same time, mortgage interest rates at unprecedented highs are severely limiting and thinning the ranks of new home buyers.
Developers, in turn, are also monitoring the situation. Many have used 2022 for preparation and design work, and now it is time to decide what to do with projects ready for the market. Is the current market activity and record interest rates too risky to start, will investors’ expectations be met and will the projects not only be started but also successfully completed – developers need to find answers to such questions before making decisions to bring more new supply to the market.
Despite the uncertainty, developers still dare to offer new projects to the market – during the quarter, they started selling about 900 new apartments in 14 new multi-apartment or ongoing project phases. The number of vacant apartments on the market currently reaches 3,100 apartments, i.e. 9 percent more than at the beginning of the year, but about the same as it was 2 years ago – in April 2021. More and more apartments with a higher level of completion are appearing on the market, so customers can evaluate the planned property and all its advantages, disadvantages, and level of completion live. Last year, only 1/10 of the apartments could be viewed live, and currently 31 percent of the unsold apartments on the market have entered the final stage.
The annual growth in the price of new apartments in the first quarter of 2023 decreased and amounts to 18.5 percent (23.0 percent at the beginning of the year). The change in the total average price during the quarter decreased by 0.3 percent, i.e. the average market price decreased from 3340 to 3330 EUR/sq m., but the situation and the situation in individual market segments are quite different. Middle-class housing became more expensive during the quarter by 2.8 percent – from 3570 to 3670 EUR/sq m. Buyers in this segment returned to the market first and they are less sensitive to interest rate changes. Meanwhile, economy-class housing became cheaper by 3.7 percent – from 3000 to 2890 EUR/sq m. A price correction to the lower side of 2.7 percent is also recorded in the luxury housing segment. – from 4820 to 4690 EUR/sq m., but the main challenge in this segment is the lack of supply, not buyers who have disappeared from the market.
It is clear that in 2023, buyers will have much greater opportunities to choose, rather than rushing to sign a contract at the earliest possible stage of the project, as was the case in the last few years. Sellers, in turn, will have to find ways to help buyers purchase the housing they are building, especially in the economy class segment – in individual projects, these will be discounts, more flexible payment terms, or fully furnished housing, easing the financial burden of settlers in terms of housing installation and own funds.
Facts
- In the first quarter of 2023, 642 apartments were sold. The result of the quarter is as much as 63 percent higher than in the last quarter of 2022 (394 apartments), but is 35 percent lower than in the first quarter of 2022 (981 apartments).
- The most popular housing types in the first quarter of 2023 were middle-class – 57 percent of apartments sold (368 apartments), economy-class apartments (251 apartments) accounted for 39 percent of sales, and only 4 percent of apartments sold during the quarter were luxury housing (23 apartments).
- The number of buyers of economy-class housing increased the most during the quarter – almost 5 times, since at the end of 2022, buyers of this segment were most frightened by the interest rate shock (from 55 to 251 apartments sold). Middle-class sales grew by 21 percent during the quarter compared to the fourth quarter of 2022 (from 304 to 368 apartments sold). Prestige-class sales decreased by as much as 49 percent during the quarter (from 35 to 23 apartments sold).
- During the first quarter of 2023, the number of vacant apartments on the market increased by 9 percent and currently stands at 3,100 vacant apartments on the market, compared to 2,850 in the previous quarter.
- The annual change in supply is much higher – 32 percent. In April 2022, there were only 2,350 vacant apartments on the market, while there are currently 3,100 units.
- During the quarter, the share of completed and under construction apartments on the market increased from 29 percent to 31 percent (964 apartments), while the remaining 69 percent (2,041 apartments) of apartments are visible only in drawings and are in the midst of construction.
- Over the course of a year, the share of completed and ongoing projects in the market increased from 11 to 31 percent, with growth 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 increased by 27 percent (up to 150 apartments), in other segments the number of vacant apartments increased by 7 percent (up to 1,410 apartments) in the middle class and 10 percent in the economy segment (up to 1,550 apartments).
- During the first quarter of 2023, developers offered about 900 new apartments to the market, which is 45 percent more than in the previous quarter (620 new apartments).
- During the first quarter of 2023, the price of new apartments in Vilnius changed the most in the economy segment – it decreased by 3.7 percent, in the average segment prices increased by 2.8 percent, in the luxury housing class a 2.7 percent decrease in price was recorded. The price level currently reaches 2890 eur/sq m in the economy, 3670 eur/sq m in the average and 4690 eur/sq m in the prestigious class.
- Due to the above-mentioned price changes, the total average price of new housing in Vilnius decreased by 0.3 percent during the quarter: from 3,340 EUR/sq m to 3,330 EUR/sq m. The annual price growth from April 2022 is 18.5 percent.