At the beginning of the year optimism persists in the housing market

After a more moderate performance in 2015, at the beginning of 2016 the Lithuanian residential property market gained the momentum. Rising activity in the residential property market, rising sale and rent prices and increasing borrowing volumes can be observed in all regions of the country.

Positive economic developments in the country and growing expectations of people continue to increase residential property prices in the cities. According to Ober-Haus, in Q1 2016, prices for apartments in Vilnius increased by 1.3%, in Kaunas – by 0.7%, in Klaipėda – by 0.4%, in Šiauliai – by 1.2% and in Panevėžys – by 1.1%. According to the data of the State Enterprise Centre of Registers, in Q1 2016, 15% more house purchase and sale transactions were concluded than in the same period last year. At the same time, there were nearly 24% more apartments purchase and sale transactions registered than last year.

This year, an even greater leap in sales can be seen in the segment of newly built apartments.  According to Ober-Haus, in Q1 2016 in five major cities of Lithuania, 1,336 newly built apartments were purchased directly from developers in apartment buildings under construction or completed buildings. It is over 21% more than in Q4 2015 and as many as 61% more than in Q1 2015. At the beginning of 2015, after the introduction of the euro in the country, the sales of newly built apartments fell or were briefly stagnant, hence such considerable change in the number of transactions in Q1 2016 was recorded.

It was the capital city where the sales figures for new apartments reached new heights. In Vilnius, as many as 1,118 newly built apartments were sold or reserved in apartment buildings under construction or completed buildings in Q1 2016. The effect of the supply of new projects in the country’s capital continues to be felt. The growing construction volumes of multi-apartment buildings increase the share of new apartments in the total transaction volume (in 2015, the sale of newly built apartments accounted for 33% of the total number of transactions and in Q1 2016 the share increased to 49%). If Q4 2015 saw the best sales performance in the new apartment segment over the past 7 years, so the indicators of Q1 2016 increased by almost 20%. Such indicators should not come as a surprise, because the supply volumes have reached the peak. Compared to 2014, in 2015 27% more apartments (3,558) were built in Vilnius and completion of around 3,600 new apartments is planned in 2016.

Similar trends can be observed in Kaunas, where more and more new multi-apartment buildings are being built. In Q1 2016, 133 apartments were sold/reserved in Kaunas, i.e. 41% more than in Q4 2015. It is likely that good sales results of newly built apartments will be recorded in 2016, because developers in Kaunas are taking an opportunity of offering new projects to the market. In terms of the volume of construction in progress, up to 30% more apartments should be completed in Kaunas in 2016 compared to 2015.

Since the supply of new apartments in Klaipėda is still lower than that in Kaunas, sales volumes in this city are maintained at the expense of the sales of previously constructed apartments. In Klaipėda, 73 apartments were sold/reserved in Q1 2016, i. e. 11% more than in Q4 2015. With quite a large stock of unsold apartments, developers in Klaipėda are in no hurry and pursue moderate investment policies by focusing on the small project development. If all projects for the construction of multi-apartment buildings were implemented in Klaipėda, over 150 new apartments would be built in 2016 or almost 20% more than in 2015.

Full review (PDF): Lithuania Residential Market Commentary Q1 2016