The number of new apartments built is not record high, but still the largest over the past decade

To sum up the results of 2018, it can be said that the year was one of the most active for housing developers in Lithuania and the city of Vilnius continued to be in the lead among the capitals of the Baltics by the quantities of new housing. Ober-Haus has obtained the factual data on the completed multi-apartment buildings in 2018 in Vilnius. “We provide detailed data for the year 2018 and answers to the following key questions: how many and what type of apartments were built, who built them, and where they were built. At the same time we provide a review not only of the last year’s performance, but analyse it within the context of the past 15 years and offer this year’s forecasts,” Raimondas Reginis, Research Manager for the Baltics at Ober-Haus, said.

Ober-Haus has for more than 15 years collected comprehensive data on housing development both in Vilnius and in other major cities in Lithuania. Currently only the database of Vilnius city and its suburbs contains information about the multi-apartment building projects built in 2003–2018 when almost 50,000 apartments were offered for sale. The statistics on apartments in multi-apartment buildings in this overview does not include the data on private houses, terraced houses and non-standard projects (e.g. loft conversions). The data about the projects exclusively for rent or social housing are also outside the scope of this overview.

According to Ober-Haus, in Vilnius developers built 4,355 new apartments or 5% more than in 2017. Although the volumes of apartment construction haven’t reached the 2006–2008 level (during that period 4,800–5,800 apartments were built annually), in terms of the diversity of new projects in Vilnius the year 2018 was truly exceptional. If between 2003 and 2017, buyers could choose from not more than 50 different multi-apartment building projects, in 2018 they could choose from 58 different newly built projects.

A total of 43% of all apartments built in three urban neighbourhoods

In 2018, the multi-apartment building projects in Vilnius were very diverse (in terms of quantity, quality and geography). Developers built new multi-apartment buildings in 15 out of 21 neighbourhoods of Vilnius. Traditionally, the most popular and most rapidly developing areas of the city were most attractive to developers. Over 70% of all new apartments were built in seven urban neighbourhoods: Pašilaičiai (15.3%), Pilaitė (13.9%), Šnipiškės (13.5%), Verkiai (7.9%), Naujamiestis (7.8%), Žirmūnai (6.5%) and Lazdynai (6.5%).

According to Reginis, in recent years developers have been more active in investing in multi-apartment projects in the neighbourhoods of Vilnius where the new housing development has been scarce (e.g., Naujoji Vilnia, Naujininkai, Vilkpėdė, Lazdynėliai, Naujasis Antakalnis) or even in the neighbourhoods located outside the city (e.g., Klevinė Užubaliai, Naujasis Lentvaris). Developers try to offer apartments to customers in the locations where there is far less direct competition than in the most popular neighbourhoods of the city.

In 2018, economy class apartments dominated

In 2018, the fastest growth was recorded in the construction of economy class apartments in Vilnius. Ober-Haus estimates that the share of the economy class apartments (the price level of up to 1,500 EUR/sqm without final fit-out), increased from 30% to 45% compared with 2017. In the meantime, the share of the medium class apartments (the price level from 1,500 EUR/sqm to 2,000 EUR/sqm) decreased in a year from 52% to 36%. The most stable situation remained in the projects involving higher class apartments (the price level in excess of 2,000 EUR/sqm) – their share grew from 18% to 19% in 20188.

According to Reginis, looking at the distribution of apartments built in 2018 by classes, last year’s supply was really well balanced and sufficiently accurately reflected the structure of the purchasing power of the population.

Record small apartments were built

Over the past 15 years, the floor area of the new apartments has been steadily and rather quickly decreasing, which is no longer a surprise, but the year 2018 will go down in history for the smallest average size of apartments built in the multi-apartment buildings in Vilnius. According to Ober-Haus, in 2018, compared with 2017, the average size of apartments built in the multi-apartment buildings decreased by 3.5 sqm totalling 50.2 sqm. Compared with the size of multi-apartment buildings built in 2003–2009, the decrease is by one fifth on average or slightly over 12 sqm.

The rapid decrease in the average floor area of apartments in Vilnius has been recorded since the last economic downturn, when developers started to design and build greater numbers of smaller apartments and increase the share of such apartments in apartment buildings. This means that apartments with fewer rooms are offered more frequently, the floor planning of apartments has become more rational (inefficient and hardly used spaces in the apartments were eliminated or reduced), and sizes of the rooms became smaller. “It is no surprise, therefore, that there are 3-room apartments of 50-55 sqm on the market and that new apartments with a separate kitchen are a thing of the past. Therefore it comes as no surprise that the decreasing size of newly built apartments prompted the development of private or terraced houses offering more spacious housing for larger families,” Reginis pointed out.

A profile of multi-apartment developers – the share of developers with average experience grew fastest

Most experienced developers on the market contributed most to the supply of new apartments in 2018, although their share decreased over a year. According to Ober-Haus, experienced real estate development companies with at least 4 different residential projects in their portfolio built 44% of apartments in the capital city in 2018 (in 2017 this indicator was 66%). Developers with less experience (2-3 completed projects) built 43% of all apartments and their share increased fastest within a year (in 2017 year this indicator was 24%). The share of the companies without longer history of housing development (not more than one implemented project) or the newcomers of the market increased from 10% to 13% in 2018.

Speaking about developers with less experience or first-time property developers in the housing market, it should be noted that a certain portion of such companies may be established by company groups with a firm financial backing, which specialise in other business segments or are better known as commercial property developers who in recent years have re-routed their investment into the housing development. Such companies can afford to recruit highly skilled service providers (designers, contractors, supervisors and other consultants) and successfully implement housing projects thus gaining experience and becoming known as housing developers in the market. However, the active housing market also attracts first-time developers who cannot prove in advance to the investor or the buyer that they will be able to manage the complex project planning and construction properly.

What lies ahead in the multi-apartment building market in Vilnius in 2019?

At the start of the year we are able to provide a sufficiently accurate forecast what to expect in the multi-apartment building market in the capital city. After assessing the construction of multi-apartment buildings in progress or pending, scheduled completion and historical experience in the housing development, Ober-Haus forecasts that a total of about 4,500-4,600 apartments will be built in 2019 or an average of 5% more than in 2018. “Of course, the main condition for such forecast is at least stable general economic situation,” Reginis added.

“Looking at the volume of housing construction which continues at an unabated pace, the question remains whether the volume meets the demand. Is the number of apartments being built too large or too little? Out of the total apartments built in 2018, 74% of them were sold or reserved at the end of 2018. In 2017, the indicator was almost the same totalling 75%. In 2016, the result was better and totalled 82%, while in 2015 it stood at 73%. Therefore, the results of 2018 are not somehow exceptional, but are an average of the past three years. This leads to the conclusion that developers build neither too much nor too little. This is really good news for the entire market,” Reginis said. To sum up the past year and looking at the year 2019, it is clear that the housing development “boom” continues and in the nearest future customers will certainly have plenty of options to choose from.

To sum up the results of 2018, it can be said that the year was one of the most active for housing developers in Lithuania and the city of Vilnius continued to be in the lead among the capitals of the Baltics by the quantities of new housing. Ober-Haus has obtained the factual data on the completed multi-apartment buildings in 2018 in Vilnius. “We provide detailed data for the year 2018 and answers to the following key questions: how many and what type of apartments were built, who built them, and where they were built. At the same time we provide a review not only of the last year’s performance, but analyse it within the context of the past 15 years and offer this year’s forecasts,” Raimondas Reginis, Research Manager for the Baltics at Ober-Haus, said.

Ober-Haus has for more than 15 years collected comprehensive data on housing development both in Vilnius and in other major cities in Lithuania. Currently only the database of Vilnius city and its suburbs contains information about the multi-apartment building projects built in 2003–2018 when almost 50,000 apartments were offered for sale. The statistics on apartments in multi-apartment buildings in this overview does not include the data on private houses, terraced houses and non-standard projects (e.g. loft conversions). The data about the projects exclusively for rent or social housing are also outside the scope of this overview.

According to Ober-Haus, in Vilnius developers built 4,355 new apartments or 5% more than in 2017. Although the volumes of apartment construction haven’t reached the 2006–2008 level (during that period 4,800–5,800 apartments were built annually), in terms of the diversity of new projects in Vilnius the year 2018 was truly exceptional. If between 2003 and 2017, buyers could choose from not more than 50 different multi-apartment building projects, in 2018 they could choose from 58 different newly built projects.

A total of 43% of all apartments built in three urban neighbourhoods

In 2018, the multi-apartment building projects in Vilnius were very diverse (in terms of quantity, quality and geography). Developers built new multi-apartment buildings in 15 out of 21 neighbourhoods of Vilnius. Traditionally, the most popular and most rapidly developing areas of the city were most attractive to developers. Over 70% of all new apartments were built in seven urban neighbourhoods: Pašilaičiai (15.3%), Pilaitė (13.9%), Šnipiškės (13.5%), Verkiai (7.9%), Naujamiestis (7.8%), Žirmūnai (6.5%) and Lazdynai (6.5%).

According to Reginis, in recent years developers have been more active in investing in multi-apartment projects in the neighbourhoods of Vilnius where the new housing development has been scarce (e.g., Naujoji Vilnia, Naujininkai, Vilkpėdė, Lazdynėliai, Naujasis Antakalnis) or even in the neighbourhoods located outside the city (e.g., Klevinė Užubaliai, Naujasis Lentvaris). Developers try to offer apartments to customers in the locations where there is far less direct competition than in the most popular neighbourhoods of the city.

In 2018, economy class apartments dominated

In 2018, the fastest growth was recorded in the construction of economy class apartments in Vilnius. Ober-Haus estimates that the share of the economy class apartments (the price level of up to 1,500 EUR/sqm without final fit-out), increased from 30% to 45% compared with 2017. In the meantime, the share of the medium class apartments (the price level from 1,500 EUR/sqm to 2,000 EUR/sqm) decreased in a year from 52% to 36%. The most stable situation remained in the projects involving higher class apartments (the price level in excess of 2,000 EUR/sqm) – their share grew from 18% to 19% in 20188.

According to Reginis, looking at the distribution of apartments built in 2018 by classes, last year’s supply was really well balanced and sufficiently accurately reflected the structure of the purchasing power of the population.

Record small apartments were built

Over the past 15 years, the floor area of the new apartments has been steadily and rather quickly decreasing, which is no longer a surprise, but the year 2018 will go down in history for the smallest average size of apartments built in the multi-apartment buildings in Vilnius. According to Ober-Haus, in 2018, compared with 2017, the average size of apartments built in the multi-apartment buildings decreased by 3.5 sqm totalling 50.2 sqm. Compared with the size of multi-apartment buildings built in 2003–2009, the decrease is by one fifth on average or slightly over 12 sqm.

The rapid decrease in the average floor area of apartments in Vilnius has been recorded since the last economic downturn, when developers started to design and build greater numbers of smaller apartments and increase the share of such apartments in apartment buildings. This means that apartments with fewer rooms are offered more frequently, the floor planning of apartments has become more rational (inefficient and hardly used spaces in the apartments were eliminated or reduced), and sizes of the rooms became smaller. “It is no surprise, therefore, that there are 3-room apartments of 50-55 sqm on the market and that new apartments with a separate kitchen are a thing of the past. Therefore it comes as no surprise that the decreasing size of newly built apartments prompted the development of private or terraced houses offering more spacious housing for larger families,” Reginis pointed out.

A profile of multi-apartment developers – the share of developers with average experience grew fastest

Most experienced developers on the market contributed most to the supply of new apartments in 2018, although their share decreased over a year. According to Ober-Haus, experienced real estate development companies with at least 4 different residential projects in their portfolio built 44% of apartments in the capital city in 2018 (in 2017 this indicator was 66%). Developers with less experience (2-3 completed projects) built 43% of all apartments and their share increased fastest within a year (in 2017 year this indicator was 24%). The share of the companies without longer history of housing development (not more than one implemented project) or the newcomers of the market increased from 10% to 13% in 2018.

Speaking about developers with less experience or first-time property developers in the housing market, it should be noted that a certain portion of such companies may be established by company groups with a firm financial backing, which specialise in other business segments or are better known as commercial property developers who in recent years have re-routed their investment into the housing development. Such companies can afford to recruit highly skilled service providers (designers, contractors, supervisors and other consultants) and successfully implement housing projects thus gaining experience and becoming known as housing developers in the market. However, the active housing market also attracts first-time developers who cannot prove in advance to the investor or the buyer that they will be able to manage the complex project planning and construction properly.

What lies ahead in the multi-apartment building market in Vilnius in 2019?

At the start of the year we are able to provide a sufficiently accurate forecast what to expect in the multi-apartment building market in the capital city. After assessing the construction of multi-apartment buildings in progress or pending, scheduled completion and historical experience in the housing development, Ober-Haus forecasts that a total of about 4,500-4,600 apartments will be built in 2019 or an average of 5% more than in 2018. “Of course, the main condition for such forecast is at least stable general economic situation,” Reginis added.

“Looking at the volume of housing construction which continues at an unabated pace, the question remains whether the volume meets the demand. Is the number of apartments being built too large or too little? Out of the total apartments built in 2018, 74% of them were sold or reserved at the end of 2018. In 2017, the indicator was almost the same totalling 75%. In 2016, the result was better and totalled 82%, while in 2015 it stood at 73%. Therefore, the results of 2018 are not somehow exceptional, but are an average of the past three years. This leads to the conclusion that developers build neither too much nor too little. This is really good news for the entire market,” Reginis said. To sum up the past year and looking at the year 2019, it is clear that the housing development “boom” continues and in the nearest future customers will certainly have plenty of options to choose from.