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 0.5% in December 2023. Overall, the apartment prices in the major cities of Lithuania have increased by 1.7% over the last 12 months. The average annual apartment price increase in 2023 (January-December year-on-year) stood at 8.2%.

In December 2023, apartment sales prices in Vilnius, Kaunas, Klaipėda and Panevėžys increased by 0.4%, 0.6%, 0.8% and 0.8% respectively and the average price per square meter in these cities was EUR 2,575 (+11 EUR/sqm), EUR 1,736 (+10  EUR/sqm), EUR 1,640 (+13 EUR/sqm), and EUR 1,081 (+8 EUR/sqm). In Šiauliai, apartment sales prices decreased by 0.7% and the average price per square meter was EUR 1,098 Eur (-8 EUR/sqm).

Apartment prices rose year-on-year in December 2023 in all major cities of the country: 1.1% – in Vilnius, 2.7% – in Kaunas, 2.4% – in Klaipėda, 2.4% – in Šiauliai and 2.0% – in Panevėžys

“Despite the decrease in the number of sales transactions in the Lithuanian housing market by 14% for two consecutive years, the country avoided a decline in the sale prices in 2023. In the course of the year, only minor positive or negative monthly changes in the sales prices of apartments were recorded, resulting in a symbolic overall annual price increase of 1.7%. The last time even lower annual price increase was recorded in the country’s major cities was ten years ago, in December 2013, and stood at 1.1%. Since apartment sales prices remained record high throughout the year, the average annual change in 2023 remained quite solid – at 8.2%. Looking at the results of the last decade, a faster average annual growth of apartment prices in the country’s major cities was recorded only in 2021 (14.2%) and 2022 (21.5%). Overall, the sales price curve for apartments in 2023 coincided with the national inflation rates and almost replicated the changes in prices of other consumer goods and services.

Looking at individual cities or housing segments in the country, the overall trends in price changes during the year were almost identical. A rapid slowdown in price growth was recorded across all major cities and housing segments. Despite the low activity of the primary apartment market and the discounts and various gifts offered by developers, the prices for newly build apartments in 2023 increased slightly more than the prices of older apartments, an increase of 3.2% and 0.7% respectively.

Even the subdued mood and the noticeable drop in activity on the property market did not force the majority of the sellers to actually reduce their prices and as the year progressed housing market participants essentially moved into the waiting mode. Potential buyers were waiting for a clearer geopolitical situation, lower mortgage rates or lower house prices, while sellers expected buyers to return to the market in the future and waited patiently for them. Meanwhile, housing developers were as active as ever in promoting their properties and offering various benefits to buyers, and reduced the volume of new developments. If there is a turnaround in the market expected by sellers and buyers in 2024 and buyers return to the market, a negative annual change in house prices is likely to be avoided. However, taking into account all the existing global or local challenges, it is possible that the recovery of the housing market will not necessarily be sudden and it will take longer than expected for the buyers’ willingness and capacity to buy homes to recover,” says Raimondas Reginis, Head of Market Research for the Baltics, Ober-Haus.

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 0.1% in November 2023 (the price index in October 2023 decreased by 0.1%). Overall, the apartment prices in the major cities of Lithuania have increased by 1.2% over the last 12 months (the annual growth in October 2023 was 1.1%).

In November 2023, apartment sales prices in Kaunas, Klaipėda and Šiauliai increased by 0.2%,  0.5% and 0.2% respectively and the average price per square meter in these cities was EUR 1,726 (+4 EUR/sqm), EUR 1,6270 (+8 EUR/sqm) and EUR 1,106 (+3 EUR/sqm). In Panevėžys, apartment sales prices decreased by 0.1% and the average price per square meter was EUR 1,073 (-1 EUR/sqm). In Vilnius, apartment sales prices remained unchanged and the average price per square meter stood at EUR 2,564.

Apartment prices rose year-on-year in November 2023 in all major cities of the country: 0.8% – in Vilnius, 1.9% – in Kaunas, 1.3% – in Klaipėda, 2.9% – in Šiauliai and 1.5% – in Panevėžys.

“Unlike housing market activity, which suffered another downturn in November, price expectations of the population remain quite optimistic. According to the State Enterprise Centre of Registers, in November 2023, compared to October 2023, almost 16% fewer apartments and 24% fewer houses were purchased in Lithuania. In terms of activity, it was one of the worst months in the year. Meanwhile, according to the survey of households conducted in H2 2023 for the Bank of Lithuania, 39% of the respondents thought that home prices would increase over the next 6 to 12 months and only 21% of the respondents thought that they would decrease. The remaining 40% said that home prices would remain unchanged or had no opinion. Compared to the results of a similar survey conducted in 2022 (23% responded that home prices would increase, 4% – that prices would decrease, and 73% believed there would be no changes in prices), there is no prevailing opinion on the housing market outlook this year. Therefore, it may be concluded that even though the activity in the housing market has slowed down considerably, the majority of the country’s population remains calm and does not make any hasty home buying or selling decisions. The changes in apartment prices recorded this year reflect this situation – a stable housing price curve has formed in the course of the year,” noted Raimondas Reginis, Head of Market Research for the Baltic countries at Ober-Haus.

The Ober-Haus Apartment Price Index for Lithuania (OHBI), which captures changes in apartment prices in the five largest Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), decreased by 0.1% in October 2023 (unchanged from September 2023). The overall level of apartment prices in Lithuania’s major cities grew by 1.1% over the last 12 months (an annual growth of 2.6% was recorded in September 2023).

In Vilnius, Kaunas and Panevėžys, during October 2023, the sales prices of apartments decreased by 0.1%, 0.1% and 0.4% respectively, and the average price per square metre was EUR 2,565 (-€3/m²), EUR 1,722 (-€2/m²) and EUR 1,074 (-€4 /m²). However, in Klaipėda in October, the average price per square metre actually rose by 0.3% to EUR 1,619 (+€6/m²). In Šiauliai, the average price per square metre remained unchanged during the month at EUR 1,103.

During the year (October 2022 to October 2023), apartment prices grew in all major cities of the country: in Vilnius – by 0.8%, in Kaunas – by 1.8%, in Klaipėda – by 0.7%, in Šiauliai – by 3.4%, and in Panevėžys – by 1.9%.

The significant downward adjustment in housing market activity and the cessation of rising sales prices are clearly affecting the decisions of new housing developers. According to the latest data from the Lithuanian State Data Agency, the number of residential units in multi-family buildings (buildings with three or more dwellings), the construction of which was started in Q1-Q3 2023, has decreased by as much as 49% compared to the same period in 2022. During the same period, the number of permits issued for dwellings in multi-apartment buildings shrank by 51%. This shows that investors are not expecting a sudden recovery in the housing market and are adjusting their plans for new housing development (delaying the start of construction indefinitely, reducing the number of building permits issued, and so on).

The low sales activity in the primary market and the increase in the number of unsold housing units in already built projects have significantly reduced developers’ confidence in the housing market. According to Ober-Haus data, from January to October this year, as compared with the average for 2022, the sales volumes of new apartments in Vilnius decreased by 13%, in Kaunas by 30%, and in Klaipėda by 27%. In view of the current difficulty in attracting buyers, even with a small discount, developers are reluctant to bring new homes to the market. It is likely that the significant decrease in supply may help developers to largely maintain the current level of housing prices on the market.

According to Ober-Haus data, over 1,500 new apartments were launched or sold in Vilnius in the first nine months of this year, which is a quarter less than in the same period in 2022. In contrast, in 2021, for example, which was a year of extremely high market activity, more than 4,600 apartments were offered to the market during the same period. “This means that developers’ intentions to invest in the construction of new apartments have reduced by two-thirds in two years”, says Raimondas Reginis, Head of Market Research for the Baltics at Ober-Haus.

In 1998, the Lithuanian real estate market was characterised by a lack of housing, poor credit conditions and an underdeveloped commercial real estate sector. Over the last 25 years, the number of apartments for sale has increased more than 10-fold, housing market activity has almost quadrupled, lending rates have fallen from double to single digits, and modern office buildings and shopping malls are now numbering in the hundreds – that’s the picture according to the Ober-Haus Real Estate Market Review 1998–2023, conducted to celebrate the company’s 25th anniversary.

The Year 2000 Marked the Beginning of the Creation of the Lithuanian Real Estate Market

The years 1998–2000 can be considered as the period when the real estate sector in Lithuania began to evolve. Due to the absence of credit services, the Lithuanian population was mostly only able to purchase a home using their own funds, and commercial construction with the intention to sell or lease was in its infancy. And so, 25 years ago, investors were developing single apartment blocks, business/office assets and shopping centres, where any new development for sale or rent was regarded as a significant event in the real estate market.

The Russian economic crisis, which began in 1998, had lasting negative consequences for the Lithuanian economy and prevented the real estate sector from developing more rapidly for at least a few years. Despite this, new-build housing gradually became available to a much wider segment of the population. Housing prices fell and the credit market started to grow much faster.

In Vilnius from 1998 to 2000, developers built around 300-500 flats for sale in apartment blocks each year, and from 2003 a major construction boom started in the capital (in Kaunas and Klaipėda it occurred from 2005, and in Šiauliai and Panevėžys from 2006–2007). It lasted until the height of the global financial crisis. After that, the real estate market and the construction sector were in recession for almost five years (2009–2013), followed by another period of active development. In recent years, developers in the capital have been building 10 times more apartments – around 4,000-5,000 – each year.

Improving affordability rates  

Over the last 25 years, the statistical ratio of apartment prices to wages has been steadily changing, but the most influential factor was the surge in the housing credit market in 2002 and 2003, after which rapidly rising housing prices were offset by much improved financing conditions.

Although the price-to-wage ratio started to deteriorate rapidly in the period from 2004 to 2006, at the time, buyers were not concerned with the price of property, but rather with the possibility of financing 100% of the purchase for a very long period. This affordability ratio recovered only after the global financial crisis.

The rapidly growing credit market has led to the rapid development of the property sector

Twenty-five years ago, access to home mortgage loans was significantly worse than today: high equity requirements, short loan periods and annual interest rates of 10-15% or even higher. Up until the 2000s, only a few banks in Lithuania offered long-term housing loans, with a maximum loan term of 10 years.

The country’s economic recovery after the Russian crisis and the improving financial situation of individuals, and companies, attracted the attention of foreign investors and the credit sector. Seeing the growth potential of the undeveloped market, new lending institutions were actively setting up in Lithuania, and competing for customers on increasingly attractive lending terms: equity requirements and interest rates were falling and the maximum duration of loans was increasing significantly.

The breakthrough in the lending market came in 2002–2003, when banks first began granting housing loans for a period of 40 years (before that, the maximum loan period was 25 years). This clearly improved the affordability of homeownership, as the longer loan period allowed homebuyers to significantly reduce their monthly mortgage payments.

 

 

Since the late 1990s, the number of dwellings (apartments and private houses) purchased in Lithuania has been growing steadily and rapidly, with a relative peak in activity in 2005. In that year, almost 17 dwellings per 1,000 inhabitants were purchased, which was almost three times more than in 2000.

 

In the period 2007–2009, this indicator fell by almost 60% and relative market activity returned to the level of 2000–2001. Since 2009, it has taken 10 years to reach a new national record for housing market activity. The ensuing aftershock of another real estate boom, pushed housing prices and market activity to unprecedented heights. In 2021, there were already 20 dwellings purchased per 1,000 inhabitants in Lithuania.

 

 

The cost of credit expansion and the collapse of the property market

 

As subsequent events have shown, these radical changes in the credit market came at a price, paid for by the entire national economy and the real estate market at the height of the global financial crisis (2008–2009). It was the availability of housing credit to a large section of the population that opened up access to home ownership, producing unsustainable growth in the real estate market between 2004 and 2007.

 

Despite the attempts of housing developers to bring more and more new homes to the market each year, the market potential was noticeably higher and the real estate market was locked in a frenzy of price increases. According to Ober-Haus, sales prices of apartments in the country’s major cities increased by a factor of three between 2004 and 2007, while the affordability index dropped to record lows.

 

For example, in 2003, an average Vilnius resident could buy 5.1 sqm in a middle-class apartment in Vilnius based on their average net annual salary, whereas in 2007 this indicator was only 3.1 sqm. By 1998, the indicator in Vilnius was 5.5 sqm, rising in 2022 to 6.6 sqm.

 

Growth in the commercial property market

 

The rapidly improving availability of finance has given a huge boost to the country’s entire construction sector. It was only 20-25 years ago that residential and commercial projects started to develop more actively in the country’s major cities, allowing residents to settle in individual architectural designs and businesses to operate in modern, renovated or newly-built facilities. Offices became one of the fastest growing real estate segments in the country’s major cities, as start-ups and expanding companies sought to offer modern workplaces for their employees.

 

Over the last 25 years, more than 350 projects (including different development phases) have been completed in Vilnius, Kaunas and Klaipėda alone, providing over 1.4 million sqm of modern office space and currently employing around 150,000 employees.

 

The active development of shopping centres

 

The development of the retail sector has been no less impressive. In the late 1990s, the major grocery chains started to accelerate the opening of new supermarkets. The first retail and wholesale DIY centres for building materials, and the first traditional supermarkets opened their doors, offering a wide range of goods and services under one roof.

 

Currently, there are close to 60 larger shopping centres in Lithuania, with a total retail space of about 1.2 million sqm. Whereas in 2003 there was only 0.06 sqm of retail space per capita in such centres, by 2023 this indicator is seven times higher (about 0.41 sqm). This figure does not even include the large number of grocery stores currently operating across Lithuania or the larger-scale retail parks that are emerging.

 

Between 2000 and 2010, the total usable area in business centres and traditional shopping centres in Vilnius, Kaunas and Klaipėda grew 16-fold to almost 1.3 million sqm. Although the following decade (2010–2020) was characterised by a more moderate rate of growth in modern space (60% increase in total area), developers began to focus more on the qualitative aspects of development and to offer the market an increasing number of more innovative and diversified projects. The next decade is likely to be characterised by even greater qualitative diversity and a proliferation of refurbishment projects for buildings that are no longer fit-for-purpose or obsolete.

 

 

Quality property development

 

Looking at the changes in the country’s real estate sector over the last 25 years, one can clearly see not only a quantitative but also a qualitative leap in developments. Whereas a few decades ago the market was very receptive to any new project, nowadays it is much more interested in new development principles or products that are being used internationally. These include, energy efficiency, sustainability assessment standards for buildings, the application of ESG criteria, e-commerce, the ‘15-minute city’ concept, co-living and working spaces, temporary shops and the development of multifunctional business space projects.

 

 

 

The Ober-Haus Apartment Price Index for Lithuania (OHBI), which captures changes in apartment prices in the five largest Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), remained unchanged in September 2023 (August 2023 figures had shown 0.4% growth). The overall level of apartment prices in Lithuania’s major cities grew by 2.6% over the last 12 months (an annual growth of 4.9% in August 2023).

In September 2023, Klaipėda, Šiauliai and Panevėžys recorded 0.2%, 0.3% and 0.4% growth respectively, and the average price per square metre rose to EUR 1,613 (+3 €/m²), EUR 1,103 (+3 €/m²) and EUR 1,078 (+4 €/m²). Meanwhile, in Vilnius and Kaunas, the average price per square metre decreased by 0.1% month-on-month to 2.568 Eur (-3 €/m²) and 1.724 Eur (-2 €/m²) respectively.

Over the year (September 2023 as compared to September 2022), apartment prices grew in all major cities of the country: in Vilnius – by 2.6%, in Kaunas – by 3.2%, in Klaipėda – by 1.6%, in Šiauliai – by 3.7%, and in Panevėžys – by 2.5%.

The stagnation period in the Lithuanian housing market continues. Although the market activity indicators do not show any signs of improvement, the majority of home sellers have not changed their sales strategy but instead, are prepared for a longer sales process. For example, according to the latest SEB Bank survey, 46% of the surveyed population in Lithuania believe that the price of housing will increase in the next twelve months (it was 43% in Q2 2023). This means that almost half of the respondents still expect house prices to increase in the near future. At the same time, there are also a number of sellers on the property market who are currently reluctant to adjust the selling price downwards and are willing to wait for a longer time for a potential buyer.

However, the slowdown in market activity is causing some home sellers to reconsider not only their selling price expectations but also to accept lower offers from potential buyers. Not all sellers can wait for a longer period of time, so we often see cases in the market where sellers in a hurry to sell, will first lower the publicly quoted sale price (their exaggerated expectations) and then have to withstand pressure from potential buyers for additional price reductions. Currently, those who want to sell in a hurry have to offer a competitive price, as homebuyers only take a decision to buy a home when they are convinced that the price of the home they are buying is at or even below the market level.

If the overall housing market activity remains at its current low level for an extended period of time, the position of home sellers will be further weakened and we will increasingly see cases in the market where homes will be sold at a price lower than the previously established market level. According to the data from the State Enterprise Centre of Registers, in September 2023, as compared to September 2022, 8% fewer older apartments were purchased in Lithuania, and this is the nineteenth month in a row in which a negative annual change of transactions in this segment has been recorded. The situation in the primary apartment market in major cities has recently stabilised, but the annual sales figures continue to be in negative territory. “According to Ober-Haus data, from January to September this year, the sales volumes recorded in Vilnius were 16% lower, 30% lower in Kaunas, and in Klaipėda they were 27% lower, when compared to the average for 2022” says Raimondas Reginis, Head of Market Research for the Baltics, Ober-Haus.

In the office segment, the phenomenon of sublease – the transfer of part of a company’s leased premises to a third party – became popular during the pandemic and has remained since. The market of subleased property is usually not included in the official statistics published by real estate agencies. According to OBER-HAUS, current tenants of Class A and Class B+ business centres in Vilnius alone could be offering several thousand or even tens of thousands of square metres of space for sublease.

Sublease is usually simply understood as renting space not directly from the owner or manager of a business centre, but from an existing tenant established and operating in the business centre. The principle of sublease itself existed long before the pandemic, but has only become more popular in recent years as businesses switched to remote or hybrid work, consequently, the amount of space required for their operations has decreased.

OBER-HAUS estimates that since the beginning of the pandemic, the average office space in Vilnius has decreased by about 30%. In other words, companies entering into new contracts today are renting office space by almost a third smaller than a few years ago. However, office lease contracts are usually long-term and companies have invested considerable amounts in fitting out the leased offices, so subleasing part of the space is an attractive option of using the space that has for various reasons become available. This is particularly relevant when the existing lease agreement does not allow the company to surrender part of its space without incurring a penalty.

Sublease has its advantages and disadvantages for each of the parties. Subleasing part of the premises allows the existing tenants to reduce the financial burden of the unused space, either fully or partially. On the other hand, some companies deliberately lease surplus space as a reserve for future expansion and then sublease part of the space temporarily in the first year. Among sublessors, there are also medium-sized and large, well-known companies that have failed to expand or postponed their expansion and recruitment plans. The only disadvantage of sublease for the sublessor may be the fact that the common areas of the office can be used by people who are not part of the company, yet this challenge is solved by simple interior redesign solutions.

From a subtenant’s perspective, the biggest advantages of sublease are fully furnished premises in attractive business centres, the possibility of moving in very quickly and flexible lease terms. Sublease options are readily available to companies looking for a shorter lease term or a fully furnished office. Sublease is also of interest to businesses that have a strategic need to be located in a particular business centre, but the business centre cannot offer free space. Finally, some businesses choose sublease as a trial period before renting larger premises directly or renting premises for a temporary project or a team. But these options contain disadvantages: such premises are usually leased for a short period of time – a few months or a few years – and it will usually be impossible to adapt the furnished premises to their needs.

The price factor in the sublease market has no clear rules. On the one hand, a subleased space is usually fully furnished, so the subtenant can move straight in, but this is factored into the higher price per square metre. Also, the flexibility of sublease and shorter terms tend to push the price upwards. On the other hand, the financial burden of unused space and the possible penalties for the existing tenant may force the tenant to sublease the available space at a rate below market prices. Each sublease case is therefore individual, but flexible and optimal arrangements are certainly possible in the market.

Sublease is generally tolerated and not opposed to by managers or owners of business centres. Although many standard lease agreements stipulate that sublease is only allowed with the manager’s approval, in practice the approval is usually obtained if the interested party meets the owner’s requirements. Managers of business centres have a clear motivation for this as sublease helps to maintain planned income streams and there is always the possibility that the subtenant will become a direct and long-term tenant in the future.

Sublease is referred to as a ‘hidden vacancy’ by property market participants – its official size is not disclosed. Offices are offered for sublease in the same way as offices for lease in the primary market, but usually through specialist brokers, not publicly. Currently, the official vacancy rate in the primary office market in Vilnius is around 8%: 6% in Class A and 9% in Class B business centres. Rents, excluding VAT, in Class A business centres today range from 16.5 to 20 EUR/sqm and in Class B business centres – from 13 to 15 EUR/sqm. Vacancy at the rate of 8% in Vilnius today would mean about 86,000 sqm of office space available for rent on the primary market, but this figure does not include the subleased office space market, which, according to various estimates, may stand at 10,000 sqm or even more. Moreover, not every company has yet considered the possibility of subletting part of its premises, so this market certainly still has a huge reserve.

Far from being a grey or shadow market, its growth is simply an illustration of the changes taking place in business across the world, for which property developers will eventually offer sustainable solutions. So far, sublease has remained a significant niche market, harder to see with the naked eye, but which can create flexibility for both tenants and landlords.

 

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 0.4% in August 2023 (the price index in July 2023 increased by 0.3%). The apartment prices in the major cities of Lithuania have increased by 4.9% over the last 12 months (the annual growth in July 2023 was 6.7%)

In August 2023, apartment sales prices in Vilnius, Klaipėda, Šiauliai and Panevėžys increased by 0.5%,  0.4%, 0.6% and 0.8% respectively and the average price per square meter in these cities was EUR 2,571 (+14 EUR/sqm), EUR 1.610 (+7 EUR/sqm), EUR 1,100 (+7 EUR/sqm) and EUR 1,074 +8 Eur/sqm). In Kaunas, apartment sales prices decreased by 0.2% and the average price per square meter stood at EUR 1,726 (-3 EUR/sqm).

Apartment prices rose year-on-year in August 2023 in all major cities of the country: 5.1% – in Vilnius, 5.3% – in Kaunas, 3.5% – in Klaipėda, 5.2% – in Šiauliai and 3.6% – in Panevėžys.

“Following the disappointing market activity indicators recorded in July this year, in August an increase in the number of apartment sales transactions was recorded in Lithuania. According to the State Enterprise Centre of Registers, in August 2023, compared to July 2023, almost 20% more older apartments were purchased in Lithuania. However, in August this year, compared to the same month last year, 6% less older apartments were purchased in Lithuania (10% more in Panevėžys, 6% more in Vilnius, 3% less in Kaunas, 15% less in Klaipėda and 30% less in Šiauliai).

Meanwhile, in the primary market, overall apartment sales volumes remain volatile. Although developers in the country’s major cities sold more apartments in August than in July, overall volumes remain modest by historical standards. According to Ober-Haus, in January-August this year, compared to the average for 2022, a decrease in sales volumes recorded in Vilnius stood at 17%, in Kaunas – 29% and in Klaipėda – 22%.

Despite the subdued and largely stagnant housing market activity, apartment prices continue to stay record high. Although slight changes in sales prices have been recorded this year, the overall price level in almost all the country’s major cities is now at an all-time high. For example, since the previous price peak in the country’s major cities at the end of 2007 or the beginning of 2008, prices are now 29.6% higher in Vilnius, 16.1% higher in Kaunas, 7.7% higher in Panevėžys and 5.4% higher in Šiauliai. Klaipėda is the only major city that has not yet reached the level of prices that was 15 years ago. Currently, the overall level of apartment sales prices in Klaipėda is 10.8% lower than that in 2H 2007. Looking at this year’s price dynamics (minor positive and negative price changes), it can be essentially noted that home prices have reached their peak in the current cycle of very rapid price growth. It is likely that the housing market will remain sluggish in the near future and the annual price change, which has been declining for eleven consecutive months, will shrink to zero by the end of this year,” noted Raimondas Reginis, Head of Market Research for the Baltic countries at Ober-Haus.

 

 

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 0.3% in July 2023 (the price index in June 2023 decreased by 0.1%). The apartment prices overall in the major cities of Lithuania have increased by 6.7% over the last 12 months (the annual growth in June 2023 was 9.1%).

In July 2023, apartment sales prices in Vilnius, Kaunas, Šiauliai and Panevėžys increased by 0.3%, 0.4%, 1.4% and 0.7% respectively and the average price per square meter in these cities was EUR 2,557 (+7 EUR/sqm), EUR 1,729 (+6 Eur/sqm), EUR 1,093 (+15 Eur/sqm), and EUR 1,066 (+8 Eur/sqm) respectively. In Klaipėda, apartment sales prices remained the same and the average price per square meter stood at EUR 1,603.

Apartment prices rose year-on-year in July 2023 in all major cities of the country: 7.4% – in Vilnius, 7.0% – in Kaunas, 4.9% – in Klaipėda, 5.1% – in Šiauliai and 4.0% – in Panevėžys.

“Although activity in the housing market in Lithuania weakened in July, this did not have a negative impact on the sales prices of apartments. This is particularly noticeable in the lowest-price segment, which, due to lower prices, is currently attracting a lot of attention from home buyers.

According to the State Enterprise Centre of Registers, in July 2023, compared to the same month last year, 24% less older apartments were purchased in Lithuania (the decrease in Klaipėda stood at 8%, in Kaunas – 26%, in Vilnius – 30%, in Šiauliai – 34%, and in Panevėžys – 35%). If we look at the overall 2023 activity indicators, they were lower only than those in January and February, when the housing market activity usually hits the lowest point. However, historically, such low level of market activity in the older apartment segment was recorded in 2012.

Even though the level of activity in the housing market plummeted in July this year, this did not have a negative impact on the sales prices of apartments, but on the contrary, a slight increase in prices was recorded. One of the reasons for this is the continued high demand for the lowest-price housing on the market today. In an environment of high interest rates and record sales prices, a large number of potential home buyers are forced to look for more economic options, i.e. to lower their expectations and to look for lower quality housing. They find such apartments mostly in standard older apartment blocks in urban residential districts, which account for the largest share of the housing market. The analysis of transactions in the country’s major cities this year shows that sales prices for such housing have continued to show a tendency towards a slight increase. For example, in the capital city, 2-3 room apartments in older blocks in residential districts, recently sold at 1,500–2,500 EUR/sqm. However, if it is a newly refurbished apartment in an older apartment building in good condition (e.g. a recently renovated apartment building), buyers may pay up to 3,000 EUR/sqm. Meanwhile in Kaunas, the purchase prices for such apartments are 1,200–1,800 EUR/sqm and in Klaipėda –1,000–1,700 EUR/sqm. However, if it is a newly refurbished apartment, the selling price in these cities can reach or exceed 2,000 EUR/sqm.

Although sales prices in the more expensive segment (apartments closer to the city centre or in new apartment buildings) have remained stable recently, buyers of such housing are in a much better position to negotiate the purchase price, because the seller of such property understands that the potential buyer has the alternative of purchasing a less expensive (lower quality) home. Therefore, when the housing market activity has significantly cooled down, sellers of more expensive housing, unlike sellers of less expensive housing, are much more likely to reduce the sales price,” commented Raimondas Reginis, Head of Market Research for the Baltic countries at Ober-Haus.

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), decreased by 0.1% in June 2023 (the price index in May 2023 increased by 0.2%). The apartment prices in the major cities of Lithuania have increased by 9.1% over the last 12 months (the annual growth in April 2023 was 12.3%).

In June 2023, apartment sales prices in Vilnius and Klaipėda decreased by 0.2% and 0.3%, respectively and the average price per square meter in these cities was EUR 2,550 (-6 EUR/sqm) and EUR 1,602 (-4 Eur/sqm). In Kaunas and Panevėžys, apartment sales prices increased by 0.2%, 0.1% respectively, and the average prices per square meter stood at EUR 1,723 (+4 EUR/sqm) and EUR 1,058  (+1 EUR/sqm) respectively. Apartment sales prices remained unchanged in Šiauliai and the average price per square meter was EUR 1,078.

Apartment prices rose year-on-year in June 2023 in all major cities of the country: 10.5% – in Vilnius, 8.6% – in Kaunas, 7.1% – in Klaipėda, 4.6% – in Šiauliai and 4.6% – in Panevėžys.

“The level of apartment sales prices in the country’s major cities has remained stable for over six months, so the annual growth rate of prices has been steadily declining and in June fell below the 10% threshold. The current annual growth rate of apartment prices is the lowest in the last two years and is expected to continue to decline rapidly over the course of this year (taking into account the current price trends and the longer-term outlook).

Meanwhile, the housing market remains sluggish and shows no signs of recovery. Activity indicators remain in negative territory, with significantly fewer home purchases than a year ago. According to the State Enterprise Centre of Registers, in June 2023, compared to the same month last year, 18% less older apartments were purchased in Lithuania (the decrease in Klaipėda stood at 10%, in Vilnius – 22%, in Kaunas – 22%, in Panevėžys – 25%, and in Šiauliai – 29%). Despite the fact that all major cities of the country have recorded a negative annual change in the number of transactions, the number of older apartments purchased in June this year in Kaunas, Klaipėda, Šiauliai and Panevėžys was still higher than that in May. Meanwhile, in Vilnius, the trend remained negative, with fewer older apartments purchased in June than in May. This is the third month in a row when the number of transactions of older apartments in the capital city is decreasing. It is very likely that home buyers in the country’s most expensive city are not finding it easy to make the purchase at the moment due to the record high prices and rising interest rates,” noted Raimondas Reginis, Head of Market Research for the Baltic countries at Ober-Haus.

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 0.2% in May 2023 (the price index in April 2023 increased by 0.3%). The apartment prices in the major cities of Lithuania have increased by 12.3% over the last 12 months (the annual growth in April 2023 was 14.0%).

In May 2023, apartment sales prices in Klaipėda and Šiauliai decreased by 0.1% and 0.5%, respectively and the average price per square meter in these cities was EUR 1,606 (-1 EUR/sqm) and EUR 1,077 (-6 Eur/sqm). In Vilnius, Kaunas and Panevėžys, apartment sales prices increased by 0.2%, 0.5% and 0.3% respectively, and the average prices per square meter stood at EUR 2,556 (+6 EUR/sqm), EUR 1,719 (+9 EUR/sqm) and EUR 1,057 (+3 Eur/m²) respectively.

Apartment prices rose year-on-year in May 2023 in all major cities of the country: 14.7% – in Vilnius, 10.2% – in Kaunas, 10.0% – in Klaipėda, 5.8% – in Šiauliai and 6.9% – in Panevėžys.

“The latest results in both primary and secondary housing market activity show that the Lithuanian housing market has remained fairly stable recently, however, at least in the short term, the overall outlook is negative. For example, following more active months of March and April this year, a slump was recorded again in the activity in the secondary apartment market in May. According to the State Enterprise Centre of Registers, in May 2023 nearly 2,000 older apartments were purchased in Lithuania, or 12% less than in April 2023 and 19% less than in May 2022. Meanwhile, the overall sales volumes in the primary apartment market continue to remain at low levels. According to Ober-Haus, in January-May this year, compared to the average indicator in 2022, sales volumes were by 22% lower in Vilnius, 17% – in Kaunas and 34% – in Klaipėda. The activity rates in May in these cities did not show a positive trend either.

The situation is similar with respect to apartment sales prices. Once again, small positive or negative changes have been recorded in the sales prices in the country’s major cities, indicating continued price stagnation. With the housing market activity remaining at a relatively low level or even declining, it is increasingly likely that we will see more and more negative changes in apartment sales prices as the year progresses. In the environment of rising mortgage rates, homebuyers remain extremely cautious, while most home sellers are still reluctant to offer real discounts,” noted Raimondas Reginis, Head of Market Research for the Baltic countries at Ober-Haus.