Apartment Developers’ Investments Have Been Shrinking

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.

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