Insight
EIKA Development Director Martynas Žibūda:
“It seems that the shock caused by the coronavirus pandemic has left only a 4-5-month mark on the “cardiogram” of the Vilnius primary housing market. Since April, sales have been rising by tens of percent every month, and September reached the record sales level of January and February of this year – as many as 620 apartments. It seems that higher sales volumes are limited only by the temporary shortage of housing in the most popular – middle – class, which was caused by the short-term postponement of developers’ investments in construction and acquisitions of new territories. Time will tell whether this is a “compressed spring” effect, when, in addition to the usual flow of buyers, buyers who postponed the purchase of housing during the quarantine months are returning to the market. However, it seems that during the quarantine, some residents were able not only to maintain their income level, but also, due to reduced expenses, to accumulate additional savings, which they expect to invest not only safely, but also profitably in steadily increasing real estate. In addition to investors, we receive a number of buyers, most often families who have decided to improve the quality of their housing and want to expand the space of their existing home, which is currently particularly relevant, as we spend more time at home.
Sales after the quarantine have returned to the record level of 2019: in the last three months, an average of 470 apartments have been sold, i.e. exactly the same as last year’s average. However, the red light is flashing due to the decreasing supply. Supply decreased by as much as 15 percent during the quarter. Developers, who suspended or abandoned projects during the quarantine, are unable to keep up with the monthly growing sales and cannot offer new apartments to the market so quickly, which creates a deficit and creates the prerequisites for price growth. Another important aspect, when it comes to supply, is the drastically decreasing supply in the middle class – during the quarter, the supply in this segment decreased by as much as 30 percent. from 1908 to 1342 apartments. The lack of affordable housing for young people closer to the center, i.e. middle-class housing of about 1800-2400 EUR per sq m. in some districts of Vilnius allows developers to raise housing prices. In addition, out of 800 new apartment projects offered during the quarter, 10 projects did not have a single mid-range project. This situation may continue, as developers are finding it increasingly difficult to find attractive plots for development in Naujamiestis, Žirmūnai or Šnipiškės, and most of them hide the risk of land lease and the uncertainty of the costs brought by the entry into force of the Land Law.”
Facts
- In the third quarter of 2020, 1,406 apartments were sold in the primary housing market of Vilnius, which is only 7 percent less than the historically record-breaking third quarter of 2019 (1,515 apartments), but as much as 242 percent more than in the second quarter of 2020 during the quarantine, when only 411 apartments were sold.
- The largest share of transactions was made up of economy class sales – 43 percent of transactions, the middle class was not far behind – 41 percent of transactions, and 16 percent of sales were in the luxury housing segment.
- During the quarter, the amount of unsold housing in Vilnius decreased by as much as 15 percent and currently stands at 3,540 vacant apartments.
- About 38 percent of this warehouse consists of completed and under construction apartments, while 2 out of 3 apartments for sale, or about 62 percent, are in the midst of construction.
- In the third quarter of 2020, real estate developers offered 800 new apartments to the market in ten different projects, i.e. 12 percent less than in the second quarter of 2020, when construction and sales of 900 apartments began.
- During the third quarter of 2020, the price of new apartments in Vilnius changed the most in the economy class – it grew by 3.4 percent, in the medium class the growth was lower – 1.8 percent, and in the luxury segment prices did not change. The price level currently reaches 1630 EUR / sq. m. in the economy class, 2255 EUR / sq. m. in the medium class and 3140 EUR / sq. m. in the prestigious class.
- Due to the above-mentioned price changes, the total average price of new housing in Vilnius increased by 1.9 percent during the quarter: from 2,100 EUR / sq. m. to 2,140 EUR / sq. m.