Search 
The Ober-Haus Lithuanian apartment price index (OHBI), which records changes in apartment prices in the five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 0.4% in July 2016. The annual apartment price growth in the major cities of Lithuania was 4.8% (the annual apartment price growth in June 2016 was 4.7%).
In July 2016 apartment prices in the capital grew 0.5% with the average price per square meter reaching EUR 1,383 (+7 EUR/sqm). In the past 12 months, the prices of apartments in Vilnius increased by 6.1% and since the last lowest price level recorded in May 2010 prices have increased by 19.8% (+229 EUR/sqm). Apartment prices in Kaunas, Klaipėda and Šiauliai in July grew by 0.1%, 0.1% and 0.7% respectively with the average price per square meter reaching EUR 971 (+1 EUR/sqm), EUR 1.003 (+1 EUR/sqm) and EUR 589 (+4 EUR/sqm). In Panevėžys apartments prices remained stable and were the same as in last month – 547 EUR/sqm.
In the past 12 months, the prices of apartments grew in all major cities: 6.1% in Vilnius, 3.3% in Kaunas, 2.7% in Klaipėda, 5.4% in Šiauliai and 3.2% in Panevėžys.
“Recently, the biggest cities in the country and especially in the capital have seen continuous increases in apartment prices. From the beginning of 2013 – when the lowest average apartment price for the five biggest cities in Lithuania was recorded – until this July, apartment prices have increased by 10.8%. That said, we should also consider the nominal prices for apartments in relation to changes in the prices of other goods and services in the country. The official data show that from the beginning of 2013 until this July inflation, measured by the Harmonised Index of Consumer Prices, amounted to barely 0.2%. Thus, the actual apartment price change (after eliminating inflation) in the biggest Lithuanian cities during this period basically corresponded to the nominal growth and amounted to 10.5%. Consequently, apartment prices increased much faster than the officially recorded basket of consumer goods and services in recent years. Nevertheless, employee earnings rose even more than the housing prices: during the last three years, net salaries in Lithuania increased by 16.5%. This means that, despite increasing prices, housing affordability is still on the rise in Lithuania,” said Saulius Vagonis, head of the Valuation and Analysis Department at Ober-Haus.
Lithuanian Apartment Price Index, July 2016
In Q2 2016, activity in the housing market retained its momentum with little likelihood of slowing down. The house and apartment purchase-sale transactions outnumbered not only those concluded in Q1 2016, but were also more numerous on a year-on-year basis. According to the data of the State Enterprise Centre of Registers, in Q2 2016, Lithuanians concluded 19% more transactions in apartments, and nearly 7% more transactions in purchase and sale of houses than in Q2 2015. During Q2 2016, on average, 890 deals in the purchase-sale of houses, and 2,840 transactions in apartments were concluded in Lithuania per month. As reported in the Ober-Haus Q2 2016 residential market overview, the largest number of transactions of purchase-sale of houses and apartments were recorded last May, and house sales indicators were the highest since 2007.
Q2 2016 was also distinguished for rapidly growing apartment prices. Unlike previous periods the increasing prices were not just recorded in Vilnius but also in all major Lithuanian cities. The most rapid increase in prices during this April, May and June was recorded in Šiauliai, where on average prices rose by 2.5% (up to 585 EUR/sqm). During the same period prices in Vilnius increased by 2.4% (to 1,376 EUR/sqm), Kaunas – 2.1% (to 970 EUR/sqm), Panevėžys – 1.8% (to 547 EUR/sqm), and Klaipėda – 1.2% (to 1,002 EUR/sqm) respectively. Despite the negative demographic trends in the country (according to Statistics Lithuania, during 2015 the population was increasing only in Vilnius city, Kaunas district, Klaipėda district, Palanga city and Neringa municipalities), an accelerated price increases were also outside the capital. The continuing favourable economic conditions – growth in employment rates and wages, as well as record-low interest rates boosted the housing market despite the overall decrease of the national population.
According to Ober-Haus, among the five major cities the most prominent leap in the number of apartment sale transactions during Q2 was recorded in Vilnius (up by 25% as compared to Q1 2016). A major contributor to the trend was also the rapidly growing segment of newly constructed apartments. According to the data of Ober-Haus, during Q2 2016 in the five major cities of Lithuania 1,395 newly constructed apartments were purchased or booked directly from construction companies in apartment blocks under construction or those already completed. This represents an increase of 3% as compared to Q1 2016, and a leap of 45% from the data of Q2 2015.
Record new heights were again reported in the volume of apartment sale deals in the capital. During Q2, 1,154 newly constructed apartments were sold in Vilnius in apartment blocks already completed or still under construction; this was 3% more than realised during Q1, and a jump of 42% on a year-on-year basis. The largest contributor to the new apartment sale indicators was the most recent projects – as many as 69% of all apartment sales fell within the projects complete in 2016–2017. 22% of the apartments sold during Q2 were constructed in 2015, and only 9% were sold in multi-apartment houses constructed in 2007-2014. “The most recent apartment house projects provide the broadest options for purchasers, and although the number of unsold apartments in the projects of earlier years (although fully completed) is limited, they attract much less attention,” Saulius Vagonis, Head of Valuation & Analysis at Ober-Haus, said.
The sales of middle class new apartments continue to be the dominant trends in Vilnius, and the prices of such apartments with a partial finish most often range from 1,450 to 1,900 EUR/sqm. Of all the newly constructed apartments sold during Q2 in Vilnius, 49% were middle-class apartments, while 38% and 13% of all apartments were economy and prestigious class respectively. “Recent years have seen developers tending to target not only the lowest-cost housing segments, but also higher class projects. Proximity to the centre of the city, better energy efficiency solutions, and prices below 2,000 EUR/sqm – these are the prevailing attributes for the multi-apartment houses currently under construction in the capital,” Mr. Vagonis noted.
Similarly, Kaunas and Klaipėda are showing slightly enhanced activity in the construction of multi-apartment houses. Although the majority of the projects being developed are of limited scope (on average, 25-35 apartments in an apartment building), increasingly different types of projects are being introduced to the market in different areas of the cities. According to Ober-Haus, in Kaunas, during Q2 2016, a total 141 apartments were sold or booked in the primary market, which is by 6% more than in Q1. Within the same period, 87 new apartments were sold or reserved in Klaipėda, i.e. an increase of 9% from Q1 2016.
The high apartment sales indicators caused a further decrease in the number of unsold newly constructed apartments in all cities throughout the country. At the end of Q2 2016, there were 1,922 unsold apartments in already completed new projects in major Lithuanian cities, i.e. by 14% less than at the end of Q1 2016. Despite the extremely rapid increase in the volumes of new construction in the capital, the number of unsold new apartments in completed buildings has notably decreased. In Vilnius, there were 1,063 unsold apartments in completed construction projects, i.e. 21% less than at the end of Q1 2016.
Currently the total number of unsold apartments in Vilnius is the smallest since Q3 2014, and has been decreasing for the second quarter in a row. The number of unsold apartments of the other cities is also declining, i.e. late in Q2 2016, there were 277 apartments in Kaunas, 554 apartments in Klaipėda, and 28 new construction apartments in Šiauliai. The improved demand for housing, and the decreasing numbers of unsold apartments have encouraged developers to launch new projects not only in Vilnius, Kaunas, Klaipėda or the health resort areas, but also in smaller cities – Šiauliai and Panevėžys.
Full review (PDF): Lithuania Residential Market Commentary Q2 2016
Over the past few years, Vilnius has recorded a rapid increase in the supply of higher-class apartments. On the other hand, the share of middle and prestigious-class apartments has been growing in the overall volume of the supply of new apartments. For instance, three years ago as many as 65% of the apartments built in Vilnius in 2013 were economy class, with only 6% being more expensive prestigious class apartments. The current trends and the statistics of 2016 are showing a different picture. According to the data of Ober-Haus this year more than 700 prestigious class apartments will be built in the capital, with sales prices (without final fit-out) more than EUR 2,000 EUR/sqm; and will account for as much as 19% of the year’s total supply.
Currently in Vilnius the prices of the most expensive new apartments with partial finish and fully completed old construction (in historical buildings) generally do not exceed 3,200-3,500 EUR/sqm. However, developers are fairly optimistic, and expect to sell new apartments in the capital’s most attractive locations (central part of the city and the Old Town) for 4,000-5,000 EUR/sqm. The most daring housing developers in Kaunas and Klaipėda have already implemented or are developing higher class apartment projects, in which the price per square meter is 2,000 EUR. It should be noted, however, that in both Kaunas and Klaipėda prices for the most expensive apartments (of old and new construction) are generally below 1,800-1,900 EUR/sqm.
What are the data of the official statistics, and what are the apartment purchase-sale deal prices in the most expensive segment? Since the price levels in the country’s major cities are different, in Vilnius the sample was made up of all apartment deals registered during the first six months of this year, and in which the square meter price exceeded 3,000 EUR (parking spaces and storage rooms were excluded). In Kaunas and Klaipėda, the selection included apartments with a price per square meter below 1,800 EUR. During the first six months 39 such apartments were sold in Vilnius, and 6 and 5 apartments, respectively, in Kaunas and Klaipėda. The share of such sales transactions in the overall sales statistics is especially small. According to the calculations of Ober-Haus, the share of the most expensive apartments in the overall number of sales transactions was 0.8% in Vilnius, and 0.3% in Kaunas and Klaipėda.
In Vilnius, the average price for such apartments was 3,313 EUR/sqm (average area – 80 sqm), in Kaunas – 2,052 EUR/sqm (average area – 52.sqm), Klaipėda – 2,005 EUR/sqm (average area – 73.sqm). The most expensive apartment sold in Vilnius in H1 2016 was in the newly constructed apartment building at Šiaulių St. – a 130 sqm apartment with car parking places was sold for 560,000 EUR (4,000 EUR per sqm without the parking space price). Other apartments sold for more than 3,000 EUR/sqm were sold in the central part of Vilnius, the Old Town, Užupis and Žvėrynas districts (Gedimino Ave., V. Mykolaičio-Putino St., Šiaulių St., Polocko St., Aušros Vartų St., Olimpiečių St., Užupio St. Trakų St., Odminių St., J. Basanavičiaus St., Šaltinių St., Šv. Mykolo St., Krivių St., M. K. Čiurlionio St., Šv. Mikalojaus St., Malūnų St., Mindaugo St., A. Smetonos St., Konstitucijos Ave., A. Jakšto St., Tilto St., Blindžių St.). In Kaunas the highest price per square meter was paid for an apartment in the Old Town, Raguvos St.; a 65 sqm sized apartment in a fully refurbished old construction building was sold for 155,000 EUR (nearly 2,400 EUR per sqm). In Klaipėda the highest price per square meter was paid for an apartment in the Old Town, Danės St.; a 78 sqm apartment in an old construction building was sold for 180,000 EUR (nearly 2,300 EUR per sqm).
“Such trends in the apartment sales market show that the most expensive housing segment market was a little livelier only in Vilnius, where on average 6-7 such deals are struck per month; Kaunas or Klaipėda had only one such transaction per month”, Saulius Vagonis, Head of Valuation & Analysis at Ober-Haus, said. The sample of such property is fairly marginal even in the capital (i.e. less than 1% from total take-up), and developers or owners of luxury class housing have to work very hard to sell such property to only a limited number of buyers. True, one of the relevant reasons for such a small number of transactions is the limited supply of luxury class housing over the past few years and especially in newly constructed buildings. However, the situation is evolving, and clearly the newly developed projects are improving the overall performance indicators of the sector. For instance, 36% of the 39 most expensive apartments sold in Vilnius during the first six months of the year were in old buildings (built before 1990), 28% were sold in buildings constructed in 2004–2015, and 36% were sold in buildings completed this year.
The ongoing construction of luxury multi-apartment buildings (and especially in the capital), the process of signing preliminary purchase-sale contracts, and the sale prices as declared by the developers makes it likely that in the near future we can expect to see even more intriguing, and probably record acquisition levels, and an increased volumes in the sales of this type of housing.
Full review (PDF): Lithuania Residential Market Commentary Q2 2016
The Ober-Haus Lithuanian apartment price index (OHBI), which records changes in apartment prices in the five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 0.7% in June 2016. The annual apartment price growth in the major cities of Lithuania was 4.7% (a 4.2% annual increase was recorded in May 2016).
In June 2016 apartment price in capital grew 0.8% with the average price per square meter reaching EUR 1,376 (+10 EUR/sqm). In the past 12 months, the prices of apartments in Vilnius increased by 6.0% and since the last lowest price level recorded in May 2010 prices have increased by 19.2% (+222 EUR/sqm). Apartment prices in Kaunas, Klaipėda, Šiauliai and Panevėžys grew by 0.7%, 0.3%, 0.7% and 0.3% respectively with the average price per square meter reaching EUR 970 (+6 EUR/sqm), EUR 1.002 (+3 EUR/sqm), EUR 585 (+4 EUR/sqm) and EUR 547 (+2 EUR/sqm).
In the past 12 months, the prices of apartments grew in all major cities: 6.0% in Vilnius, 3.2% in Kaunas, 2.8% in Klaipėda, 4.7% in Šiauliai and 3.2% in Panevėžys.
“With the positive price changes recorded over the past months, many people ask the question whether apartment prices have already reached the pre-crisis level or not. At present, the average price per square metre in Vilnius (EUR 1,376 per sq m) is the same as recorded in December 2005. The all-time highest price level in Vilnius was reached in December 2007, when the price per square metre was EUR 1,983. This means that, to reach the highest indicator, the current apartment prices in Vilnius must grow by a further 44%,” said Saulius Vagonis, head of the Valuation and Market Research Department at Ober-Haus.
The greatest growth in prices in June recorded in Riga
In June 2016, apartment prices in Riga increased by 1.9% to the average price of 1,102 EUR/sqm. Over the past 12 months, the average apartment price has increased 5.0% (in May 2016, the annual increase of apartment prices was 3.1%). In total there were 4,709 apartment transactions in January-June 2016 in Riga, which is almost 27% more than in the same period of 2015.
The average apartment price in Tallinn increased by 0.6% to 1,583 EUR/sqm in June 2016, which means that annual increase is 2.8%. In total there were 4,310 apartment transactions in January-June 2016 in Tallinn, which is 2% more than in January-June 2015.
Baltic Apartment Price Index June 2016
The Ober-Haus Lithuanian apartment price index (OHBI), which records changes in apartment prices in the five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 0.9% in May 2016. The annual apartment price growth in the major cities of Lithuania was 4.2% (a 3.4% increase was recorded in April 2016).
The prices of apartments grew in all major cities in May 2016. Apartment prices in Vilnius grew 1.0% with the average price per square meter reaching EUR 1,366 (+14 EUR/sqm). In the past 12 months, the prices of apartments in Vilnius increased by 5.5% and since the last lowest price level recorded in May 2010 prices have increased by 18.3% (+212 EUR/sqm). Apartment prices in Kaunas, Klaipėda, Šiauliai and Panevėžys grew by 0.7%, 0.7%, 1.3% and 1.1% respectively with the average price per square meter reaching EUR 964 (+7 EUR/sqm), EUR 999 (+7 EUR/sqm), EUR 581 (+8 EUR/sqm) and EUR 545 (+6 EUR/sqm).
In the past 12 months, the prices of apartments grew in all major cities: 5.5% in Vilnius, 2.5% in Kaunas, 2.4% in Klaipėda, 3.8% in Šiauliai and 3.0% in Panevėžys.
“The first half of the year reminds us of the situation in 2014, when the housing market recorded the most prominent positive price changes since the end of the downturn. Particularly low interest rates on loans, positive changes in the national economy and a sufficiently stable global geopolitical and economic situation are driving housing prices in all of the country’s major cities. This May, the apartment market maintained its high-level activity. The number of apartment sale deals in the five major cities was similar to that recorded in April but was one third larger than a year ago. Provided the volumes of sale deals remain at the same level, a rise in housing prices is highly likely,” Saulius Vagonis, Head of Valuation & Analysis at Ober-Haus, said.
Full review (PDF): Lithuanian Apartment Price Index, May 2016
Realia Group, the largest service provider in real estate management and brokerage services in the Nordic countries, is to be acquired by Altor Fund IV (Altor). The Nordic private equity fund acquires the company from the current majority owners Sponsor Fund III, Nordea, and Varma. The sale and purchase agreement was signed on June 1, 2016.
Realia Group brings together a broad spectrum of competencies in real estate management and real estate brokerage services in Finland and the Baltic countries. Operations are conducted through the subsidiaries Realia Isännöinti, Realia Management, Huoneistokeskus, Huoneistomarkkinointi, and SKV Kiinteistönvälitys in Finland, and Ober-Haus Real Estate Advisors in Baltic countries.
”I am looking forward to working together with the new owner Altor, and I strongly believe that the collaboration will benefit the entire Realia Group and its subsidiaries. We have taken significant steps in developing Realia Group together with Sponsor Capital, Nordea, and Varma over the last years. This development will now be further strengthened as Altor shares our view of how to build high quality real estate management and real estate brokerage services,” says Matti Bergendahl, CEO of Realia Group.
”We have followed the development of Realia Group closely for a long time, and real estate management and real estate brokerage services are in a highly interesting developmental stage in Finland and other Nordic countries. Realia Group has very well-known brands in both real estate management as well as real estate brokerage services in Finland and the Baltic countries. We want to continue developing these services together with the management and personnel of Realia Group towards the Group’s vision: For better living and real estate wealth,” says Risto Siivonen, Partner at Altor.
”We have been building and developing Realia Group and its subsidiaries for a long time, and the Group with all its brands is very close and important to us. We decided this spring that Realia Group should continue its development in the next strategic phase supported by a new owner, and we are delighted that the new owner will be Altor, a company we know well,” says Kaj Hägglund, Managing Partner at Sponsor Capital.
The transaction will require an approval from the Finnish Competition and Consumer Authority, and it is expected to be completed by the end of June. The transaction value will not be disclosed.
For further information, please contact:
Remigijus Pleteras
OBER-HAUS General Manager
+370 659 35 033
remigijus.pleteras@ober-haus.lt
Realia Group is the biggest service provider in real estate management and real estate brokerage services in Nordic and Baltic countries. Realia Group consists of Huoneistokeskus, SKV Kiinteistönvälitys, Huom! Huoneistomarkkinointi, Realia Isännöinti, and Realia Management in Finland, and Ober-Haus in Baltic countries. Annual revenues of Realia Group is approximately 100M€, and the Group employs some 1,600 persons. www.realiagroup.fi
About Altor
Since inception, the family of Altor funds has raised some EUR 5.8 billion in total commitments. The funds have invested in excess of EUR 3.4 billion in more than 40 companies. The investments have been made in medium sized Nordic companies with the aim to create value through growth initiatives and operational improvements. Among current and past investments are Lindorff, Carnegie, Palodex, Helly Hansen, Dustin, Byggmax and Sats-Elixia. For more information visit www.altor.com.
Sponsor Capital is a Finnish private equity firm founded in 1997. The firm makes mainly majority investments in Finnish mid-sized companies that have an excellent management, stable market position and predictable cash flow. Sponsor Capital operates responsibly and long term as well as in a strongly profit-oriented mode and believing in management’s entrepreneurial spirit. Large Finnish institutions invest their capital through Sponsor Capital.
The commercial real estate market in Lithuania remained steady through Q1 2016. The overall situation in the country shows no signs of faster recovery in the construction volumes and even a decrease in the volume has been recorded. As reported in the Ober-Haus Q1 2016 office market overview, if 7–9 years ago numerous new commercial construction projects were carried out in all regions of the country, so currently more activities in the commercial real estate development can only be observed in Vilnius or Kaunas. The remaining regions of the country are less optimistic and developers offer a very small number of projects. However, the overall market interest in already completed objects (buildings and premises) at the beginning of this year remained fairly high. This is particularly visible in the total number of transactions for commercial property in the country and the purchase of larger investment objects in Vilnius.
According to Statistics Lithuania, the total value of completed construction works of non-residential buildings in the country in Q1 2016 was almost EUR 148 million or nearly 14% less than during the same period in 2015. It is worth noting that the volume of construction is also over 11% lower than that in Q1 2014. Compared to the most active period in the development of commercial buildings in Lithuania in 2007–2008, this year’s indicator is nearly half as small. However, despite the shrinking construction volumes, the number of transactions has increased. According to the State Enterprise Centre of Registers, in Q1 2016 there were 25% more transactions for non-residential property (buildings and premises) concluded in Lithuania than in the same period in 2015.
The beginning of the year did not bring any major changes in the office sector. In Kaunas, the reconstruction of an administrative building (Neris Business Centre) next to the Neries krantinės Street was completed offering about 1,700 sqm of office premises. In Q1 2016, the total office area in Kaunas increased to 91,600 sqm. While development of larger office projects is in the planning in Kaunas (one of the largest is the reconstruction/construction of the building on K. Donelaičio Street; Mikrovisatos Valda is planning to develop another office building on Savanorių Avenue), local developers are trying to offer smaller modern office buildings for lease to the market.
Completion of a small administrative building on Taikos Avenue and a multifunctional project Žaliakalnis Terraces with some administrative premises are scheduled this year in Kaunas. Development of such small projects is conducive for the office market in the city of Kaunas, because the city remains attractive to both local and international businesses. The vacancy rate in Kaunas is still very low and at the end of Q1 2016 stood at 2.8% (2.6% at the end of 2015). Positive changes in the rents of office space also contribute to successful implementation of projects. According to Ober-Haus, in Q1 2016, rents increased by 3% on average in Kaunas amounting to 10.0–13.0 EUR/sqm in A class buildings and 6.0–10.0 EUR/sqm in B class buildings.
In Klaipėda, the completion of a new office building on Minijos Street (M19) is scheduled for mid-year. The total area of the building is 2,000 sqm and will not bring any major changes in the market, but tenants will be able to choose between previously completed projects and this functional and energy-efficient building. Although in Q1 2016, the vacancy rate in Klaipėda fell from 18.8% to 17.7%, this does not offer a fundamental change in the overall situation in the market. The vacancy rates in this seaport town differ considerably from those in Vilnius and Kaunas. The lack of development of larger local or foreign businesses prevents a faster pace of development in the real estate sector, because only larger businesses can afford paying rents for new premises which meet their modern needs. Meanwhile small and medium-sized enterprises usually opt for premises located in old buildings where rents are less than 5.0–6.0 EUR/sqm. According to Ober-Haus, rents in A class business centres stand at 8.5–12.5 EUR/sqm and in B class buildings – at 6.0-9.0 EUR/sqm.
Next year the Vilnius office lease market needs faster growth in demand
Opening of six new business centres is scheduled in Vilnius this year. The usable area of the premises will total 82,600 sqm. This is a really great leap in the annual supply, which could only be compared to that in 2008, when nearly 90,000 sqm of office space area was offered to the market. At the moment, despite the growing competition, the occupancy rates in Vilnius remain very high. Since no new business centres were opened in Q1 2016, the vacancy rates in business centres in Vilnius remain unchanged and stand at 4.1%; the total area of vacant office premises amounts to 22,300 sqm, whereas the average area of unoccupied premises in buildings where office premises are offered amount to 640 sqm.
The abundance of office space development projects currently in progress or in planning in Vilnius fuels various discussions regarding rapidly growing supply and demand in the near future. In theory, over the next 15-18 months, around 100,000 sqm of office space will be offered to the market. In 2012–2014, 38,000–43,000 sqm of modern office space was leased in Vilnius each year, whereas over the first three quarters this year, the demand for modern office space stood at over 40,000 sqm. It is likely that the total area of office premises leased in 2015 will reach 50,000 sqm and this will be the largest take-up indicator since 2010. It is obvious that new projects are being developed because of objective reasons (real demand) and the main reason is the demand from international companies (service centres). K29 business centre which was nearly fully leased on its opening day shows the presence of real demand. So it is extremely important for further development prospects of the office market in Vilnius whether Lithuania will continue to attract new and to retain
Enterprises in need of larger office space (1,000–2,000 sqm) are essentially looking only at the projects in progress or projects being planned. Out of the 2016 supply, nearly half of the premises have already been leased.
Over the past six years, rents for modern office space in Vilnius have increased by 45% on average, but any further increase in rents will unlikely be so robust. The increase in rents since 2010 has clearly been determined by the improving economic situation in the country and the development of new enterprises in the capital city, therefore the demand for new premises essentially outpaced the overall supply of new premises, because real estate development has still been hampered by the fear of stagnation. No major price changes were recorded in Vilnius in Q1 2016 and rents for A class offices stood at 13.5–16.5 EUR/sqm and for B class offices – at 8.0–13.0 EUR/sqm. It is likely that the particularly active current market will be able to absorb the major portion of supply this year and we will hardly see greater price corrections (both negative and positive) in the near future. However, the situation in 2017 is less clear. In view of the current construction in progress or planned projects to be launched soon, 9–10 projects/construction stages should be completed next year and the supply should increase by further 75,000–85,000 sqm. This will be the second year in a row that such large number of projects and area of office space have been on offer in Vilnius. In order to maintain the occupancy rate, the growth in demand for modern office space in 2016 and 2017 will have to be even faster than that over the past few years. Although the country’s economic outlook is optimistic and development of services centres is positive, a pessimistic scenario of the increase in vacancy rates and an increase in the rent gap (when developers suspend further development plans due to the lack of tenants or compete by offering lower rents) cannot be excluded in 2017.
Full review (PDF): Lithuania Commercial Market Commentary Q1 2016
Whereas the market for the lease of residential property directly dependents on the numbers of working people and changes in their income, with the rise in salaries over the past five years, residential rents in all three major cities of Lithuania have been on the rise. According to the official statistics, over the past five years the average salary in the country increased by over 20%, while the unemployment rate decreased by eight percentage points (twice as much). It should also be noted that the market of the lease of residential property in Lithuania is not particularly transparent, therefore, the influence of the shadow economy in this sector can also be significant. It is only natural that such situation would be reflected in rents.
For example, over the last five years the rent of the most popular two-room apartments in Vilnius, Kaunas and Klaipėda increased by a third on average. In the meantime, apartment sales prices during the same period saw both falls and rises on a different scale in different cities. If in mid-2010, sales prices in Vilnius were record low, so in other cities they continued to decrease reaching the lowest level only in 2012–2013. Therefore much more rapid increase of rents (compared with the value of the property) increased the average yield indicators in the major cities. This is particularly visible in Kaunas and Klaipėda, as rents and sales prices in Vilnius during this period, although at different rates, moved in one direction. According to Ober-Haus, in Q1 2016, the average gross rental yield in Vilnius (the ratio between the annual rent and the acquisition price) amounted to 5.6% and was one percentage point higher than in 2010. At the same time in Kaunas and Klaipėda, higher yield indicators and their faster changes were recorded. In Kaunas, the gross rental yield was 6.0% and was 1.8 percentage points higher than in 2010; the indicator in Klaipėda was 5.9% (1.7 percentage points higher than in 2010).
Different yield indicators in these major cities of Lithuania were determined by erratic changes in property prices and investor expectations. “Over the past few years investors in Vilnius could observe stable and visible changes in sales prices and therefore were prepared to come to terms with lower earnings from rent than investors in Kaunas or Klaipėda. Higher liquidity of the property and higher growth rate in the value of the property allows to expect higher return on assets over a longer period. In the meantime, in Kaunas and Klaipėda private investors did not have greater expectations regarding the increase in prices and tried not to overpay for the purchased property; they saw return on investment based on earnings from rent, but did not expect to earn significantly on increase of sales prices,” Saulius Vagonis, Head of Valuation & Analysis at Ober-Haus, said.
However, it is likely that with the growing number of investors, the difference between rents and sales prices should decrease, which will determine a decrease of return on investment from lease. This is particularly likely in Kaunas and Klaipėda, as relatively lower sales prices of residential property (compared with rents) in the current economic environment have a higher growth potential than, for example, in the country’s capital. At the same time in Vilnius, return on investment may decline, because in recent years there has been a great interest from private investors in the residential property market in Vilnius, which increased the supply of apartments for rent. On the other hand, some existing lessees are leaving (or will leave) this market by becoming owners of residential property. It is therefore very unlikely that the rental yield will increase in the future.
Full review (PDF): Lithuania Residential Market Commentary Q1 2016
After a more moderate performance in 2015, at the beginning of 2016 the Lithuanian residential property market gained the momentum. Rising activity in the residential property market, rising sale and rent prices and increasing borrowing volumes can be observed in all regions of the country.
Positive economic developments in the country and growing expectations of people continue to increase residential property prices in the cities. According to Ober-Haus, in Q1 2016, prices for apartments in Vilnius increased by 1.3%, in Kaunas – by 0.7%, in Klaipėda – by 0.4%, in Šiauliai – by 1.2% and in Panevėžys – by 1.1%. According to the data of the State Enterprise Centre of Registers, in Q1 2016, 15% more house purchase and sale transactions were concluded than in the same period last year. At the same time, there were nearly 24% more apartments purchase and sale transactions registered than last year.
This year, an even greater leap in sales can be seen in the segment of newly built apartments. According to Ober-Haus, in Q1 2016 in five major cities of Lithuania, 1,336 newly built apartments were purchased directly from developers in apartment buildings under construction or completed buildings. It is over 21% more than in Q4 2015 and as many as 61% more than in Q1 2015. At the beginning of 2015, after the introduction of the euro in the country, the sales of newly built apartments fell or were briefly stagnant, hence such considerable change in the number of transactions in Q1 2016 was recorded.
It was the capital city where the sales figures for new apartments reached new heights. In Vilnius, as many as 1,118 newly built apartments were sold or reserved in apartment buildings under construction or completed buildings in Q1 2016. The effect of the supply of new projects in the country’s capital continues to be felt. The growing construction volumes of multi-apartment buildings increase the share of new apartments in the total transaction volume (in 2015, the sale of newly built apartments accounted for 33% of the total number of transactions and in Q1 2016 the share increased to 49%). If Q4 2015 saw the best sales performance in the new apartment segment over the past 7 years, so the indicators of Q1 2016 increased by almost 20%. Such indicators should not come as a surprise, because the supply volumes have reached the peak. Compared to 2014, in 2015 27% more apartments (3,558) were built in Vilnius and completion of around 3,600 new apartments is planned in 2016.
Similar trends can be observed in Kaunas, where more and more new multi-apartment buildings are being built. In Q1 2016, 133 apartments were sold/reserved in Kaunas, i.e. 41% more than in Q4 2015. It is likely that good sales results of newly built apartments will be recorded in 2016, because developers in Kaunas are taking an opportunity of offering new projects to the market. In terms of the volume of construction in progress, up to 30% more apartments should be completed in Kaunas in 2016 compared to 2015.
Since the supply of new apartments in Klaipėda is still lower than that in Kaunas, sales volumes in this city are maintained at the expense of the sales of previously constructed apartments. In Klaipėda, 73 apartments were sold/reserved in Q1 2016, i. e. 11% more than in Q4 2015. With quite a large stock of unsold apartments, developers in Klaipėda are in no hurry and pursue moderate investment policies by focusing on the small project development. If all projects for the construction of multi-apartment buildings were implemented in Klaipėda, over 150 new apartments would be built in 2016 or almost 20% more than in 2015.
Full review (PDF): Lithuania Residential Market Commentary Q1 2016
The Ober-Haus Lithuanian apartment price index (OHBI), which records changes in apartment prices in the five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 0.6% in April 2016. The annual apartment price growth in the major cities of Lithuania was 3.4% (a 3.2% increase was recorded in March 2016).
The prices of apartments grew in all major cities in April 2016. Apartment prices in Vilnius grew 0.6% with the average price per square meter reaching EUR 1,352 (+9 EUR/sqm).
In the past 12 months, the prices of apartments in Vilnius increased by 4.6% and since the last lowest price level recorded in May 2010 prices have increased by 17.1% (+198 EUR/sqm). Apartment prices in Kaunas, Klaipėda, Šiauliai and Panevėžys grew by 0.7%, 0.2%, 0.4% and 0.3% respectively with the average price per square meter reaching EUR 957 (+7 EUR/sqm), EUR 992 (+2 EUR/sqm), EUR 573 (+2 EUR/sqm) and EUR 539 (+2 EUR/sqm). In the past 12 months, the prices of apartments grew in all major cities: 4.6% in Vilnius, 1.8% in Kaunas, 1.7% in Klaipėda, 2.5% in Šiauliai and 1.8% in Panevėžys.