After a very active start to the year, the primary real estate (RE) market in Vilnius is experiencing a downturn, according to experts from the RE development company Realco. In June, almost three times fewer new RE transactions were concluded in Vilnius compared to the record-breaking April. Despite this decline, the activity in the RE market in the first half of this year was both exceptional and record-breaking.
“During the first half of 2021, a total of 4,266 apartments were sold in Vilnius. This is a record-setting performance of the past few years. The results exceeded the numbers of the “pandemic” 2020 by almost 2.5 times, and those of the first half of 2019 – by 42 per cent. We see that in the first six months of this year, more homes were sold than in the entire 2018, and almost three quarters of the total number sold in 2020,” says Lukas Cicėnas, Financial Director of the RE developer Realco.
In the first half of the year, the most popular neighbourhoods in Vilnius were Baltupiai (including the territory of the Ozas Park), Naujamiestis and Pilaitė. This year, almost 500 apartments were sold in each of these parts of the capital city.
“The widest choice of housing is always in the most actively developed territories. Both Baltupiai and Naujamiestis have the potential to grow, while the developed territories attract new buyers. However, we are seeing that buyers are also interested in such reviving neighbourhoods as Markučiai, Paupys, Šnipiškės, where active conversion of old industrial areas is taking place,” says Mr. Cicėnas.
Housing supply will be growing
As the volume of RE sales continues to grow, the supply of vacant housing in Vilnius has been steadily declining since the last year’s September: at the end of June, there were only 3,400 apartments remaining unsold in the capital city. According to Mr. Cicėnas, with the current supply and sales rate, all the apartments on offer would be sold within 10 months.
“Judging by the sales volumes of June, the turnover rate of housing is about 10, which is much more natural compared to that of the previous months of this year, when the rate fell below 4, and it would take 3–4 months for buyers to buy up all the available residential properties. Nevertheless, while buyers are actively looking for housing, only about a quarter of all housing currently on offer is in the final stages of construction or has already been built. As a result, housing is still often bought based on drawings,” says the Realco expert.
Although RE developers are not keeping up with demand, the supply of housing in the capital city is expected to increase in the near future – the increase in the supply of housing is expected to be influenced by the new general city plan of Vilnius, which allows the development of long-preserved areas. According to Realco, 35 design proposals for multi-apartment projects in Vilnius city were published over the first half of 2021. This suggests that the supply of apartments which are still in the design phase could increase by about 4,300 in the coming years.
There are many newly planned projects in the city centre, Šnipiškės, Lazdynėliai and Pilaitė. Major conversion is planned for the territory of the Kuro Aparatūra factory, where 783 apartments are to be built. Developers are also showing more interest in the periphery of the city – new multi-apartment projects will most likely be developed in and around Tarandė, Gulbinai, Bajorai, Visoriai.
The pandemic also affects the behaviour of buyers
According to Mr. Cicėnas, actively planned project development will lead to an increase in housing supply, while the demand should remain stable. Analysts of the Bank of Lithuania are also optimistic – they predict rapid GDP growth, rising consumer spending, falling unemployment and an annual wage increase of around 7 per cent. According to the Bank of Lithuania, deposits held by the country’s residents with banks have declined since the beginning of the year, but remain significant and at the end of May, amounted to EUR 15.8 billion.
“Macroeconomic forecasts suggest that we should see a rapid market recovery and improving performance in the coming years, and the population still has a lot of spare money. At the same time, RE developers are actively planning new RE projects, despite rising construction costs. We expect the RE market to stabilise and that about 400–600 new residential properties will be sold per month,” says Mr. Cicėnas.
The representative of Realco notes that the pandemic has also resulted in changes in customer behaviour – buyers are more cautious, read contracts more closely and keep track of the progress of construction.
“Buyers now have more fears than before. Many of them worry about whether the project of their choice will be completed. Some of them would like more flexibility – breaking down the instalments, receiving discounts or additional benefits such as free storage or parking space. Increasingly, construction experts, RE brokers and even lawyers are being involved in the decision-making process, and the opinion of family or friends alone is no longer enough,” explains Mr. Cicėnas.
Lithuanian buyers still find it important that the property offers a nice view, parks, recreational areas, cycling paths and public parking lots. The need to choose housing with larger area is growing, and low-rise apartment buildings are preferred. Spacious balconies and terraces as well as possibility to convert a balcony into a loggia remain popular.