This post was automatically translated into English
The new year in Vilnius began with a record supply – those looking for a place to live could choose from as many as 3.6 thousand newly built apartments. The new year in Vilnius began with a record supply – those looking for a place to live could choose from as many as 3.6 thousand newly built apartments.
The new year in Vilnius began with a record supply – those looking for a place to live could choose from as many as 3.6 thousand newly built apartments. This is almost 80 percent more than at the beginning of last year. It is likely that this year the supply will reach a new record and exceed the 4 thousand apartment mark. However, there is still room for new investments in Vilnius, it is important to properly assess the possibilities of districts and classes, Martynas Žibūda, development director of the company “Eika”, spoke at the LNTPA conference.
He notes that the supply curve in Lithuania jumped already at the beginning of last year, when the market was shaken by buyer activity that prompted both veterans and newcomers to the real estate market to offer more new apartments. However, in the second half of the year, demand waned and the market dangerously approached oversupply.
Since the first quarter of 2014, the supply of housing in Vilnius has been growing every quarter, while demand, contrary to supply, has been decreasing every quarter, until only 500 apartments were sold in the last quarter. The annual growth in sales by 24 percent – to 2.9 thousand apartments – was determined by the first half of 2014.
“In the second half of the year, an inadequate situation developed – supply almost reached its ceiling, and sales stopped. Although in Vilnius we are talking about a record or even excess supply, after evaluating the ratio of new apartments offered and sold, we see that the situation in Kaunas and Klaipėda is much worse. In these cities, real estate investors are waiting much longer for returns due to lower housing liquidity,” says M. Žibūda.
The real estate specialist predicts that in the first half of 2015, residents will still have to adapt to the changed currency, so the housing market will be somewhat calm, but in the second half of the year, it will be a favorable time for buyers to purchase housing, as prices will stabilize, and the most difficult thing will be choosing from the many new construction apartments on the market.
Economy class faces difficult times, prestige class faces a golden age
A real estate expert says that the most difficult times await sellers of economy-class apartments in 2015. The growth in supply of these apartments, which began in 2014, will continue to increase, moving away from the decreasing demand. According to M. Žibūda, such a situation will create excellent opportunities for buyers to negotiate on the price, while also forcing real estate developers offering economy-class apartments to improve the product or take other measures.
A different situation is currently developing in the mid-range apartment market, where as sales decline, supply is also shrinking. “Having sensed the decreasing interest of buyers, housing developers are already investing more cautiously in the construction of apartments in this class. Especially since investments in this class are higher,” says M. Žibūda.
According to the representative of “Eika”, the market for prestigious apartments is currently experiencing its best times. “For several years now, there has been talk about the insufficient supply of prestigious apartments and the existing demand. Today, housing developers are successfully filling the gap in luxury new apartments. Last year, as many as 200 prestigious apartments were sold. This is two and a half times more than in 2013,” says M. Žibūda.
2015 is likely to be a golden age for luxury housing developers, and a great time for those looking for luxury housing, as the market will finally have something to offer.
Forecast: average price will increase slightly
According to Eika data, the average price of new apartments in Vilnius increased by almost 9 percent last year. It currently stands at around 1.6 thousand euros (5.5 thousand litas) per square meter. M. Žibūda predicts that the average price of a new apartment should grow by just 1 percent this year and remain stable in 2016. This small growth will be mainly influenced by the increasing supply and demand in the prestigious apartment market.
“Prices should not decrease in the coming years due to the fact that from 2016 the European Union’s requirement to build only energy class A apartment buildings will come into effect. The cost price of these apartments will increase by about 10 percent, but the record supply and huge competition will not allow the increased costs to be passed on to buyers. Real estate developers will postpone the construction of class A housing as long as possible. Even in 2016, the construction of class B apartment buildings will mainly be carried out, which will be designed before the EU requirements come into force. Although there is a lot of talk about class A, currently only four apartment buildings of this class have been built in Vilnius,” says a real estate specialist.
Is there still room for new projects in Vilnius?
Last year, the largest number of apartments in Vilnius, almost 450, were sold in Pilaitė. It accounted for 15 percent of all new apartments sold in the capital. Baltupiai and Bajorai were in second place, where 9 percent of all new apartments were sold each. Naujamiestis was in third place.
Pilaitė, although the most popular according to buyers’ choice, lost the first position to Baltupiai when evaluating the districts with the largest supply. This district offers 450 apartments, or as much as 12 percent. of all new construction apartments in the entire capital. Next in line are Pašilaičiai (11 percent) and Naujamiestis (9 percent).
M. Žibūda says that, judging by the supply that will appear in the next two years, most new apartments should be built in the central part of the city – Užupis, Saltoniškės and Šnipiškės. Last year, developers also rediscovered the Old Town. “As buyers from the outskirts of the city moved to the center, housing developers also rushed to implement new projects there. This year and next, we expect a revival of Užupis,” says M. Žibūda.
By the end of 2016, the choice of housing in Pašilaičiai, Naujamiestis and Antakalnis will decrease. However, there is still room for attractive investments for real estate developers. Currently, Jeruzalė and Šeškinė can be called wastelands for new apartments, which real estate developers have not yet discovered. According to the representative of “Eika”, these districts will become key for housing developers who want to stand out in a crowded market.
According to the development director of Eika, it is important for housing developers to assess the liquidity of the district. According to the supply-demand ratio, the most illiquid districts last year were Pašilaičiai and Fabijoniškės, therefore new investments in these districts are not advisable for the next two years.
The best supply-to-sales ratio last year was in Pilaitė and Justiniškės, where every fourth apartment offered was sold. “This means that a developer who built 100 apartments in Pilaitė will sell about 30 apartments per year, and in Pašilaičiai – only 10,” calculates an Eika representative.
About the Eika group of companies
Founded in 1992, Eika is one of the largest real estate development and construction groups in Lithuania. The group of companies consists of: UAB Eika – a leader in the real estate market, valued for its innovation, reliability and responsibility; UAB Eikos statyba – a construction company with extensive experience in the construction and renovation of administrative, public, commercial, industrial and residential buildings.
More information:
Vitalija Roče
Marketing and Communications Manager
Phone: +370 5 2553 324
Fax: +370 5 2514 256
Email: [email protected]
old.eika.lt