Scarcity of supply freezes apartment markets in Kaunas and Klaipėda, while Vilnius bubbles

The housing sale results of Q1 2014 in Lithuania exceeded the expectations of most market players. According to data from the Centre of Registers, in Q1 2014 the number of transactions involving houses in Lithuania was 27% higher compared to the same period of 2013. The number of apartment transactions in the same period was 48% higher than a year ago. In Q1 2014, an average of 680 transactions for houses and 2,735 transactions for apartments per month were finalised in Lithuania. Thus, the current apartment sale volumes in Lithuania rocketed to the levels recorded prior to the crisis: in the first quarters of 2004–2007, the average number of apartment transactions was similar – 2,750 per month.

The restored trust in the real estate market and the favourable economic environment encourage market participants to invest in housing. Two categories of buyers can be distinguished today: direct users of housing and buyers looking for long-term investment options. The extremely rapid growth in market activity may raise questions as to whether the market is properly balanced. However, unlike 2004–2007, the market, at least for the time being, does not show many investors looking for short-term returns, the so-called speculators, which caused the previous property bubble.

The overall trends of housing market activity are also reflected in the market for new apartments. According to data from Ober-Haus, in Q1 2014, 1,090 new apartments were sold or reserved in completed and non-completed apartment buildings directly from developers in the five main Lithuanian cities. This is a 53% increase compared to Q1 2013. It should be mentioned however that the situation in individual Lithuanian cities is not the same. For instance, the demand for new apartments in the capital city this year hit their highest level in 6 years. In Q1 2014, 930 new apartments were sold in Vilnius, which is a 76% increase compared to Q1 2013.

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