EIKA Development Manager Martynas Žibūda:
There is no doubt that the war in Ukraine had a significant impact not only on the real estate market in March, but will also have an impact on the entire Lithuanian economy in the coming years. Before the war began in 2021, the primary housing market in Vilnius had a stable level of 550 apartments sold per month (the average for the month of 2021). In March of this year, this indicator fell to less than 50 units, so the total result for the quarter was 64 percent lower than in the first quarter of the year before, when 2,664 apartments were sold. However, it seems that the psychological shock caused by the war is passing, and home buyers are recovering: transactions have not yet picked up, but the number of visits to real estate websites and the number of inquiries is already normalizing. It is likely that this trend will also translate into returning transactions.
Home buyers are forced to return not only by the natural demand for housing determined by the life cycle, but also by growing inflation, which is rapidly dissolving residents’ savings. In 2021, the prices of new housing in Vilnius grew by as much as 25 percent. This trend, unfortunately, continues. This is largely due to the shortage of building materials and their inconsistent supply, both due to the pandemic and the war in Ukraine and the sanctions applied: the main raw materials for construction were purchased in Ukraine, Russia and Belarus. This is rapidly increasing the cost of real estate developers and poses challenges regarding project implementation deadlines.
On the other hand, it is still extremely difficult to obtain building permits for new real estate projects in Vilnius. As of March 1, building permits on leased state land are no longer issued in Vilnius. This was due to the hastily adopted new version of the Land Law. The lack of new projects and the “disappearing” and at the same time increasing price of building materials, even with a decline in demand, lead to insufficient housing supply, when a record low number of unsold apartments is recorded. On the other hand, Vilnius is a rapidly growing city with increasing incomes of residents. Since the beginning of the war, more and more Ukrainians and Belarusians fleeing the repressive regime have been arriving here, which is rapidly raising housing rental prices. All these circumstances make us predict an imbalance in supply and demand for at least the next six months, which will negatively affect the final housing price, which may increase by even double digits.
Facts
- In the first quarter of 2022, 956 apartments were sold. The result of the quarter is 25 percent lower than in the last quarter of 2021 (1,277 apartments) and even 64 percent lower than in the first quarter of 2021 (2,664 apartments).
- Analyzing the results of the first quarter of 2022, an even greater contrast is observed every month due to the war in Ukraine – March sales (48 apartments) are even 11 times lower than January sales (534 apartments). The stagnation of the market is also reflected in canceled reservations – 48 apartments sold is the balance between sales and canceled transactions. There were 98 sales/new reservations during March, but 50 apartments returned to the market.
- Economy-class apartment sales during the quarter accounted for 58 percent, middle-class – 37 percent of transactions, and only 5 percent of sales were in the luxury housing segment.
- During the quarter, the number of buyers of prestigious housing decreased the most – by as much as 51 percent, with only 45 apartments sold compared to 91 apartments submitted in the fourth quarter of 2021. Economy class sales decreased by 24 percent during the quarter compared to the fourth quarter of 2021. (from 737 to 558). Middle class sales decreased by 21 percent during the quarter compared to the fourth quarter of 2021. (from 449 to 353).
- During the first quarter of 2022, the number of vacant apartments on the market did not change substantially and currently stands at just 2,340 vacant apartments on the market.
- Only 11 percent of this warehouse consists of completed and under-construction apartments, while the remaining 89 percent, or 9 out of 10 apartments for sale, are only visible in drawings.
- During the quarter, the number of vacant apartments decreased the most in the prestigious and middle-class segments, where the number of vacant apartments decreased by as much as 18 percent (205 apartments) and 14 percent (855 apartments), respectively, while the supply of housing in the economy-class segment increased by about 16 percent (1,284 apartments).
- During the first quarter of 2022, developers offered about 950 new apartments to the market, almost the same number of apartments sold during the same period.
- During the first quarter of 2022, the price of new apartments in Vilnius grew the most in the prestigious segment – as much as 8.8 percent, in the economic and medium segments prices grew by 6.9 percent and 6.2 percent, respectively. The price level currently reaches 2320 EUR/sq m in the economic class, 3080 EUR/sq m in the medium class and 4670 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 3.7 percent during the quarter: from EUR 2,710 per sq m in January to EUR 2,810 per sq m in April 2022.