According to the data of Realco, one of the largest real estate (RE) development companies in Lithuania, 126 dwellings were sold on the primary RE market of Vilnius in March this year, of which 68 were in the economy segment, 53 in the mid-range segment and 5 in the premium segment. Compared to March of last year, when 935 residential properties were sold, 7.5 times fewer dwellings were bought in the same period this year. The sharp drop in housing sales is typical for the entire first quarter of this year, but according to experts, there are signs that the market may be on the verge of a breakthrough.
“Russia’s war in Ukraine has led to a dramatically different performance in the first quarter of this year compared to last year. In the first three months of this year, 920 dwellings were sold in Vilnius, compared to 2,285 last year. In 2021 we were at the top of the sales wave at this time, while this year we are just climbing out of the bottom,” Lukas Cicėnas, Realco’s CFO, noticed.
However, one thing has remained unchanged even in the face of the war: the stock of available dwellings in the capital’s primary market continues to shrink and breaks anti-records.
“At the end of the month, we counted 2,666 available dwellings, of which 1,459 are in the economy segment, 952 in the middle-range segment and 255 in the premium segment. Naturally, not only buyers but also developers are becoming more cautious in the face of the nearby war and its aftermath. The latter have slowed down the launch of new projects, both due to the uncertainty of demand and the high cost of building materials,” Mr. Cicėnas pointed out.
Some developers have benefited, others are waiting
Looking at the situation of developers in the market, the expert says that while some have benefited, others will have to wait for a better market situation. Developers with completed or were close to completion projects in their portfolios prior to the start of the Russian invasion of Ukraine were able to outpace the exponential growth in construction costs and are very likely to complete their projects with relatively small deviations from the planned budget.
“Those whose projects are still under construction are much worse off. These developers today have to assess whether they will be able to obtain the materials needed to complete the project, whether they will face labour shortages, how the cost of the project will change and, in general, whether it is worthwhile to continue with the project at the current costs of construction. And if the project is in its early stages, it is likely that most developers are doing business as usual – trying to keep the project on track at minimal costs until they get building permits. The fate of these kind of projects will be clear later when the market situation stabilizes,” Mr. Cicėnas stated.
Looking for either a first home or an investment home
According to the Realco’s expert, before the outbreak of the war, there were various kinds of buyers who were interested in housing in all segments. Today, he sees two remaining fairly clear kinds of buyers who stay active in the market.
“The first ones are younger buyers looking for their first home. It is clear that their needs and desires have not gone anywhere. These buyers target the cheaper housing in the economy segment. The second ones are slightly older buyers looking for investment properties. They are aware that the high inflation recorded last year will become an even more acute problem in the near future. These buyers are more hesitant and less likely to make decisions quickly. Younger people looking for their first home do the opposite,” he said.
Mr. Cicėnas points out that the most active sales are currently taking place in already built or nearly built projects, which are not numerous in the capital’s market – about 30% of the total housing supply. However, the situation in the real estate market is currently very dynamic and changes almost daily. The panic at the very start of the war and the stagnation in new housing sales were reminiscent of the first quarantine in 2020. As March draws to a close, the first signs of a market upturn can be seen – the supply of building materials and raw materials is stabilising, although prices are much higher, and buyers are getting used to the changed reality, resuming their previous plans and their search for a new home.
Realco, a real estate developer, has not changed its plans yet. The company is finishing construction work of the 7 Vakarai project, continuing to work on the Go Life, Prie Vilnelės and the recently launched Algirdo 3 projects. In the near future, Realco expects to start construction work in Antakalnis for the Vileišio 27 project and is also preparing projects for several other residential projects.