Housing market performance: before and after the quarantine

The year 2019 and the beginning of 2020 was an extremely active period in the Lithuanian housing market. The 2019 indicators stood out with record expenditure for the purchase of residential property, the overall housing market activity and changes in sales prices and rents of apartments. Q1 2020 promised another successful year for the housing market in Lithuania, however due to the global COVID-19 pandemic and the quarantine imposed in Lithuania in mid-March, the situation has changed dramatically in the entire real estate market, reported in the latest overview of the residential market in Lithuania by Ober-Haus.

“While the overall main indicators of the Lithuanian housing market in Q1 2020 were very optimistic, the first quarter should be divided into two periods – before imposing the quarantine (16 March 2020) and the second half of March. The second half of March was the opposite of what had been recorded in the Lithuanian housing market in 2019 or in January-February 2020,” Saulius Vagonis, Head of Valuation & Analysis at Ober-Haus, said.

In the second half of March, due to the suspension or restriction of the activities of notary offices, a decline in housing transactions was recorded. According to the Centre of Registers, in January-February 2020, 12% more purchase and sale transactions for apartments and almost 23% more transactions for houses were concluded in Lithuania compared to the same period in 2019. In March 2020, a decrease of 26% in transactions for apartments and 27% in transactions for houses was recorded compared to the monthly average in 2019. In March 2020, a fall in the number of transactions (apartments and houses) was recorded in all major cities of the country (compared to the monthly average in 2019): in Vilnius – 17%, in Kaunas – 32%, in Klaipėda – 40%, in Šiauliai – 24% and in Panevėžys – 30%.

Concluded in Lithuania compared to the same period in 2019. In March 2020, a decrease of 26% in transactions for apartments and 27% in transactions for houses was recorded compared to the monthly average in 2019. In March 2020, a fall in the number of transactions (apartments and houses) was recorded in all major cities of the country (compared to the monthly average in 2019): in Vilnius – 17%, in Kaunas – 32%, in Klaipėda – 40%, in Šiauliai – 24% and in Panevėžys – 30%.

A larger number of apartments for rent adjusted the price only marginally

In contrast to the housing sale segment, minor negative price developments were already recorded in the apartment rental market in Vilnius in March. Vilnius has the largest amount of rental property of all major cities in the country, and in the second half of March experienced the biggest drop in the customer traffic in the short-term rental segment.

“Some property owners realized that the closure of national borders and the sudden disappearance of the tourist traffic (which is the main drive for the short-term rental segment) as a result of the pandemic could cause short-term and even long-term problems in the entire accommodation sector. Some property owners applied significant discounts on the short-term rent of apartments, while other owners decided to offer them to local residents for a longer period of time. This resulted in additional volumes of long-term rental apartments on the market, which slightly adjusted the overall price level in the market,” Vagonis said.

According to Ober-Haus, in March 2020, rents for 1–2 room apartments in Vilnius decreased by an average of 1–2 %. Rents of apartments remained stable in Kaunas and Klaipėda in March.

New apartment construction in Kaunas and Klaipėda had stepped on the decrease path even before the pandemic

Looking at the realisation of newly built apartments it is also clear that March 2020 had a negative impact on the overall result of the first quarter. According to Ober-Haus, in Q1 2020, 1,380 newly built apartments were sold and reserved directly from developers in Vilnius, in Kaunas – 164 apartments and in Klaipėda – 107 apartments. Comparing Q1 2020 with the average of the four quarters of 2019, the sales volumes in the primary market decreased by 4% in Vilnius, in Kaunas – by 35%, and in Klaipėda – by 9%.

In Kaunas and Klaipėda, compared to Vilnius, a noticeable decline in the realization of newly built apartments is also linked to the recent decline in construction volumes, not only to the pandemic.

For example, the largest number of apartments since 2008 was built in Kaunas in 2018 (997 apartments), while in 2019 and 2020 a slowing down in apartment construction was recorded (836 apartments in 2019 and 750 apartments planned in 2020). Therefore, in 2017–2019, a significant surge in the realization of apartments in the primary market was recorded in Kaunas. The high realization indicator also cannot be repeated today due to the shrinking supply factor. In the meantime, it is the opposite in Vilnius, where we can see an increasing construction of apartments, which in 2020 should peak since 2008 (according to the estimates of February 2020, about 5,200 apartments are planned to be built in Vilnius). So buyers in the capital city have a very broad choice of new housing, which is reflected in the sales statistics. In Klaipėda, like in Kaunas, construction volumes are decreasing: According to Ober-Haus, if in 2019, 421 apartments were built for sale, so in 2020 it is planned to complete 350 apartments.

While the amount of mortgage loans increased in Q1 2020 compared to the same period a year ago, in March loans shrunk (the volume of new mortgage loans in March was lower than the monthly average in 2019). According to the Bank of Lithuania, in Q1 2020 new mortgage loans in the amount of EUR 340 million were granted in Lithuania or 14.4% more than at the same period of 2019. Interest rates for newly issued mortgage loans remained stable in Lithuania. The average annual interest rate for new mortgage loans in January to March 2020 was 2.39% or 0.04 percentage point higher than a year ago.

“Looking at the prospects of Q2 2020 in Lithuania’s housing market it is clear that we will record much poorer indicators than in Q1 2020. The prolonged period of quarantine, negative news flow about the overall economic situation in the country, more conservative funding for housing purchases and deteriorating expectations of the population may put the overall activity of the housing market in Q2 to long-unseen lows. At the same time, this may have a negative impact on the sales prices and rents of residential properties and call for adjustment in the plans for the development of new housing,” Vagonis said.

Full review (PDF): Lithuania Residential Market Commentary Q1 2020

Latest news

All news
Ober-Haus Celebrates 25 Years: How Has the Property Market Changed in a Quarter of a Century?

Ober-Haus Celebrates 25 Years: How Has the Property Market Changed in a Quarter of a Century?

In 1998, the Lithuanian real estate market was characterised by a lack of housing, poor credit conditions and an underdeveloped commercial real estate sector. Over the last 25 years, the number of apartments for sale has increased more than 10-fold, housing market activity has almost quadrupled, lending rates have fallen from double to single digits, and modern office buildings and shopping malls are now numbering in the hundreds – that’s the picture according to the Ober-Haus Real Estate Market Review 1998–2023, conducted to celebrate the company’s 25th anniversary. The Year 2000 Marked the Beginning of the Creation of the Lithuanian Real Estate Market The years 1998–2000 can be considered as the period when the real estate sector in Lithuania began to evolve. Due to the absence of credit services, the Lithuanian population was mostly only able to purchase a home using their own funds, and commercial construction with the intention to sell or lease was in its infancy. And so, 25 years ago, investors were developing single apartment blocks, business/office assets and shopping centres, where any new development for sale or rent was regarded as a significant event in the real estate market. The Russian economic crisis, which began in…

Buyers Show No Interest in Overpriced Housing

Buyers Show No Interest in Overpriced Housing

The Ober-Haus Apartment Price Index for Lithuania (OHBI), which captures changes in apartment prices in the five largest Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), remained unchanged in September 2023 (August 2023 figures had shown 0.4% growth). The overall level of apartment prices in Lithuania’s major cities grew by 2.6% over the last 12 months (an annual growth of 4.9% in August 2023). In September 2023, Klaipėda, Šiauliai and Panevėžys recorded 0.2%, 0.3% and 0.4% growth respectively, and the average price per square metre rose to EUR 1,613 (+3 €/m²), EUR 1,103 (+3 €/m²) and EUR 1,078 (+4 €/m²). Meanwhile, in Vilnius and Kaunas, the average price per square metre decreased by 0.1% month-on-month to 2.568 Eur (-3 €/m²) and 1.724 Eur (-2 €/m²) respectively. Over the year (September 2023 as compared to September 2022), apartment prices grew in all major cities of the country: in Vilnius – by 2.6%, in Kaunas – by 3.2%, in Klaipėda – by 1.6%, in Šiauliai – by 3.7%, and in Panevėžys – by 2.5%. The stagnation period in the Lithuanian housing market continues. Although the market activity indicators do not show any signs of improvement, the majority of home sellers have not…

Office sublease: thousands of invisible square metres

Office sublease: thousands of invisible square metres

In the office segment, the phenomenon of sublease – the transfer of part of a company’s leased premises to a third party – became popular during the pandemic and has remained since. The market of subleased property is usually not included in the official statistics published by real estate agencies. According to OBER-HAUS, current tenants of Class A and Class B+ business centres in Vilnius alone could be offering several thousand or even tens of thousands of square metres of space for sublease. Sublease is usually simply understood as renting space not directly from the owner or manager of a business centre, but from an existing tenant established and operating in the business centre. The principle of sublease itself existed long before the pandemic, but has only become more popular in recent years as businesses switched to remote or hybrid work, consequently, the amount of space required for their operations has decreased. OBER-HAUS estimates that since the beginning of the pandemic, the average office space in Vilnius has decreased by about 30%. In other words, companies entering into new contracts today are renting office space by almost a third smaller than a few years ago. However, office lease contracts are…

All news
Mandatory cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.
Functional cookies enable a website to remember information that changes the way the website behaves or looks, like your preferred language or the region that you are in. Functional cookies are currently unused.
Statistical cookies help website owners to understand how visitors interact with websites by collecting and reporting information anonymously. Statistical cookies are currently unused.
Marketing cookies are used to track visitors across websites. The intention is to display ads that are relevant and engaging for the individual user and thereby more valuable for publishers and third party advertisers.
Allow all Deny All

Mail sent!

This site is registered on wpml.org as a development site.