Record home prices ensue from optimism formed in 2021

The Ober-Haus Apartment Price Index (OHBI) in Lithuania, which records changes in apartment prices in five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 2.2% in September 2022 (the growth in August 2022 was 2.2%). The apartment prices in the major cities of Lithuania have increased by 22.7% over the last 12 months (the annual growth in August 2022 was 22%).

In September 2022, apartment sales prices increased by 2.4% in the capital city, Vilnius, and the average price per square meter reached EUR 2,504 (+59 EUR/sqm). In Kaunas, Klaipėda, Šiauliai and Panevėžys, the apartment prices increased by 1.9%, 2.2%, 1.7% and 1.4% respectively and the average price per square metre increased to EUR 1.671 (+32 EUR/sqm), EUR 1,588 (+33 EUR/sqm), EUR 1,064 (+18 EUR/sqm) and EUR 1,051 (+14 EUR/sqm) respectively.

Annual growth (September 2022 compared to September 2021) in apartment sales prices was recorded in all major cities of the country: 26.1% – in Vilnius, 19.3% – in Kaunas, 18.2% – in Klaipėda, 17.3% – in Šiauliai and 17.8% – in Panevėžys.

“Recent data of the residential real estate market show that in autumn, in the primary apartment market, buyers pushed the brakes down and the number of new apartment purchase agreements fell to a very low level. According to Ober-Haus, only slightly more than 270 apartments were sold in the primary market of the country’s capital city in Q3 2022. The last time such low activity in the primary market was recorded only in 2012 and in 2020 during the first wave of COVID-19. Meanwhile, in the secondary market of older apartments, sales volumes have remained quite high. According to the State Enterprise Centre of Registers, in September 2022, slightly over 2,300 older apartments were sold in Lithuania or 14% less than in September 2021. Despite the decreasing activity of buyers in the secondary apartment market of the country since March 2022, the total number of transactions remains at the 2019-2020 level and no further decline has yet been recorded.

Speaking about the sales prices of apartments, we do not see any obvious negative changes, except for the declining expectations of some sellers, who are no longer as optimistic as before, and, in some cases, slightly lower sales prices. Looking at the sales prices of the transactions for apartment sales actually registered in recent months, the prices in the housing market remain at the peak. For example, when analysing the largest apartment segment in Vilnius – older apartments in residential districts – their sales prices have already exceed those in the previous peak in 2007–2008. The biggest price change has been recorded in the last 12 months. The analysis of the registered purchase and sale transactions of apartments shows that in typical residential areas of the city, apartment sales prices have increased by as many as 20-40% per year. For example, in Fabijoniškės, one of the largest districts by population, the median sales price of a 1–4-room apartment built between 1987 and 1991 was 2,117 EUR/sqm in July–September 2022. This is 43% higher than in the same period in 2021. The median sales price of the apartments in the residential district of Šeškinė rose by 36% to 2,012 EUR/sqm over the year and the prices per square metre in the residential district of Pilaitė rose by 33% to EUR 1,984, while, for example, the prices in the residential district of Karoliniškės rose by 18% to EUR 1,809 over the year. If, a year ago, sales prices in these districts of the capital city were by a tenth lower than the prices in the previous peak period (end of 2007–beginning of 2008), so now they have exceeded all previous price records. Generally speaking, after a particularly rapid increase in home prices in 2021–2022 (at least in Vilnius), prices of all home segments have hit the highest point in the history of the country.

Of course, we live in the high inflation environment where not only real estate prices, but also the prices of all other goods and services are rising rapidly. Fitting out costs, which often make a significant part of the real estate price, have an impact on the final sales price of real estate. Recent increase in the prices of fitting out materials, furnishings and repair works is also reflected in home prices. For example, buyers pay more than 2,500 EUR/sqm for a newly fitted out apartment in an old apartment building in a typical residential area in Vilnius. A year ago, nothing of the kind was recorded. Therefore, despite a marked decline in optimism in the residential real estate in recent months, we still see the inertia of expectations formed in 2021,” Raimondas Reginis, Head of Market Research for Baltic Countries at Ober-Haus, noted.

The Ober-Haus Apartment Price Index (OHBI) in Lithuania, which records changes in apartment prices in five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 2.2% in September 2022 (the growth in August 2022 was 2.2%). The apartment prices in the major cities of Lithuania have increased by 22.7% over the last 12 months (the annual growth in August 2022 was 22%).

In September 2022, apartment sales prices increased by 2.4% in the capital city, Vilnius, and the average price per square meter reached EUR 2,504 (+59 EUR/sqm). In Kaunas, Klaipėda, Šiauliai and Panevėžys, the apartment prices increased by 1.9%, 2.2%, 1.7% and 1.4% respectively and the average price per square metre increased to EUR 1.671 (+32 EUR/sqm), EUR 1,588 (+33 EUR/sqm), EUR 1,064 (+18 EUR/sqm) and EUR 1,051 (+14 EUR/sqm) respectively.

Annual growth (September 2022 compared to September 2021) in apartment sales prices was recorded in all major cities of the country: 26.1% – in Vilnius, 19.3% – in Kaunas, 18.2% – in Klaipėda, 17.3% – in Šiauliai and 17.8% – in Panevėžys.

“Recent data of the residential real estate market show that in autumn, in the primary apartment market, buyers pushed the brakes down and the number of new apartment purchase agreements fell to a very low level. According to Ober-Haus, only slightly more than 270 apartments were sold in the primary market of the country’s capital city in Q3 2022. The last time such low activity in the primary market was recorded only in 2012 and in 2020 during the first wave of COVID-19. Meanwhile, in the secondary market of older apartments, sales volumes have remained quite high. According to the State Enterprise Centre of Registers, in September 2022, slightly over 2,300 older apartments were sold in Lithuania or 14% less than in September 2021. Despite the decreasing activity of buyers in the secondary apartment market of the country since March 2022, the total number of transactions remains at the 2019-2020 level and no further decline has yet been recorded.

Speaking about the sales prices of apartments, we do not see any obvious negative changes, except for the declining expectations of some sellers, who are no longer as optimistic as before, and, in some cases, slightly lower sales prices. Looking at the sales prices of the transactions for apartment sales actually registered in recent months, the prices in the housing market remain at the peak. For example, when analysing the largest apartment segment in Vilnius – older apartments in residential districts – their sales prices have already exceed those in the previous peak in 2007–2008. The biggest price change has been recorded in the last 12 months. The analysis of the registered purchase and sale transactions of apartments shows that in typical residential areas of the city, apartment sales prices have increased by as many as 20-40% per year. For example, in Fabijoniškės, one of the largest districts by population, the median sales price of a 1–4-room apartment built between 1987 and 1991 was 2,117 EUR/sqm in July–September 2022. This is 43% higher than in the same period in 2021. The median sales price of the apartments in the residential district of Šeškinė rose by 36% to 2,012 EUR/sqm over the year and the prices per square metre in the residential district of Pilaitė rose by 33% to EUR 1,984, while, for example, the prices in the residential district of Karoliniškės rose by 18% to EUR 1,809 over the year. If, a year ago, sales prices in these districts of the capital city were by a tenth lower than the prices in the previous peak period (end of 2007–beginning of 2008), so now they have exceeded all previous price records. Generally speaking, after a particularly rapid increase in home prices in 2021–2022 (at least in Vilnius), prices of all home segments have hit the highest point in the history of the country.

Of course, we live in the high inflation environment where not only real estate prices, but also the prices of all other goods and services are rising rapidly. Fitting out costs, which often make a significant part of the real estate price, have an impact on the final sales price of real estate. Recent increase in the prices of fitting out materials, furnishings and repair works is also reflected in home prices. For example, buyers pay more than 2,500 EUR/sqm for a newly fitted out apartment in an old apartment building in a typical residential area in Vilnius. A year ago, nothing of the kind was recorded. Therefore, despite a marked decline in optimism in the residential real estate in recent months, we still see the inertia of expectations formed in 2021,” Raimondas Reginis, Head of Market Research for Baltic Countries at Ober-Haus, noted.