Insight
Tomas Žiaugra, Head of the Development Department at Eika Development:
After the downhill slide of 2022, the housing market in 2023 was characterized by a stability that has not been seen for a long time: during 2023, 2,302 apartments were sold in Vilnius (2022 – 2,252 apartments), the results of the last quarter also did not stand out in the context of the year – 549 new apartments were sold (Q3 2023 – 533 apartments). If in the previous few years, various events shook the real estate market, which caused sales volumes to change from time to time during the year, then in 2023, interest rates so pressed and limited the ranks of new housing customers that it will probably be easier to breathe a sigh of relief only as this year progresses.
Developers are also monitoring the situation and trying to adapt to it – some projects are being adjusted to allow for phased construction, some projects are being postponed. However, the market is currently operating at only 50% capacity – about 200 apartments are being sold, when the average for the last 7 years is about 380-400 sales per month.
With the decrease in 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 reaches 3,400 apartments. Historically, this is not a large “storage”. However, one should not expect a faster growth in supply, at least until the European Central Bank begins to reduce interest rates, and with their reduction, buyers should also turn to the market. It is likely that then the entire sector would accelerate and return to its previous volumes. Last year, another distorted indicator from 2021-2022 stabilized, when only 1/10 of the apartments for sale could be viewed live. Currently, about 40 percent of unsold apartments on the market are entering the final stage, when the buyer can assess the completion and quality of the property being purchased.
The annual average growth in the price of new apartments at the end of 2023 reached just 0.3 percent. limit, which indicates that the price of new housing remained around 3350 Eur/sq m. m. The last quarter of the year only reflected the trends of the whole year, that different processes are taking place in individual market segments, which are not always reflected in the general statistics. In the economy class, housing became cheaper by 6 percent over the year and currently reaches 2820 Eur/sq m. m – in this segment, the greatest compromises are made when trying to find agreements between buyers and sellers, in individual cases they can reach even up to 8-10 percent. Meanwhile, housing prices in the luxury segment are growing – currently reaching around 5510 Eur/sq m. m – due to the recent decrease in supply, any start of a new project has a significant impact on the general trend of price changes in the segment.
We believe that in 2024 the interest rate “press” will begin to put less pressure on market participants and expectations in the market will gradually begin to improve. Developers used 2023 to prepare, obtain building permits, so that, if the need arises, they could start with new projects. 2024 will most likely still be the year of buyers, as agreements between buyers and sellers must be found in order for the market to remain viable. And those buyers who do not create unreasonable expectations and are connected to make decisions will benefit the most.
Facts
- 549 apartments were sold in the fourth quarter of 2023. The quarterly result is only 3 percent higher than in the third quarter of 2023 (533 apartments), but is as much as 39 percent higher than in the fourth quarter of 2022 (394 apartments).
- Comparing 2023 (2302 apartments) with 2022 (2252 apartments), 2 percent more apartments were sold than last year.
- The most popular housing types in the fourth quarter of 2023 were middle-class – 51 percent of apartments sold (278 apartments), economy-class apartments (242 apartments) accounted for 44 percent of sales, and luxury housing accounted for just 5 percent of apartments sold during the quarter (29 apartments).
- The annual trends are also very similar. Economy and middle-class housing sold 41 percent and 54 percent, respectively, in 2023 (955 and 1,237 apartments), while luxury housing sold just 5 percent (110 apartments).
- The number of economy-class housing buyers increased during the quarter by 16 percent, while middle-class sales decreased by 4 percent during the quarter compared to the fourth quarter of 2022. Prestige-class sales also decreased by 15 percent during the quarter, but the number of apartments sold decreased by just 5 apartments – from 34 to 29 apartments sold.
- During the fourth quarter of 2023, the number of vacant apartments on the market increased by 6 percent and currently reaches 3,400 vacant apartments on the market, compared to 3,210 in the previous quarter.
- The annual change in supply is higher – 20 percent. At the end of 2022, there were only 2,850 vacant apartments on the market, compared to 3,400 currently.
- During the quarter, the share of completed and under-construction apartments on the market decreased from 43 percent to 38 percent (1,310 apartments), and the remaining 62 percent (2,090 apartments) of apartments are visible only 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 25 to 38 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 economy class segment – it increased by 11 percent (to 1,710 apartments), in other segments the number of vacant apartments increased by 2 percent (to 1,520 apartments) in the middle class and decreased by 2 percent in the luxury segment (only 170 apartments).
- During the fourth quarter of 2023, developers offered about 750 new apartments to the market, which is 15 percent more than in the previous quarter (650 new apartments).
- During the fourth quarter of 2023, the price of new apartments in Vilnius grew the most in the luxury segment – as much as 6.8 percent, but this is mainly due to the record low supply in this segment, the average segment recorded a growth of 0.8 percent, and economy-class housing became cheaper by 0.4 percent. The price level currently reaches 2820 Eur/sq m in the economy, 3690 Eur/sq m in the average, and 5510 Eur/sq m in the prestigious class.
- Due to the above-mentioned price changes, the total average price of new housing in Vilnius increased slightly by 0.3 percent during the quarter: from 3,340 Eur/sq m to 3,350 Eur/sq m at the end of 2022. The annual growth for 2023 also approached zero and reached 0.3 percent.