Despite growing pressure on home sellers, they are holding on

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 February 2023 (the price index in January 2023 fell by 0.1%). The apartment prices in the major cities of Lithuania have increased by 16.3% over the last 12 months (the annual growth in January 2023 was 17.1%)

In February 2022, apartment sales prices decreased in Klaipėda and Panevėžys by 0.1% and the average prices per square meter were EUR 1,604 (-1 EUR/sqm) and EUR 1,056 (-1 EUR/sqm) respectively. In Vilnius, Kaunas and Šiauliai, apartment sales prices increased by 0.1%, 0.2% and 0.4% respectively, and the average prices per square meter stood at EUR 2,543 (+3 EUR/sqm), EUR 1,697 (+3 EUR/sqm) and EUR 1,077 (+4 EUR/sqm) respectively.

Apartment prices rose year-on-year in February 2023 in all major cities of the country: 18.7% – in Vilnius, 13.5% – in Kaunas, 13.4% – in Klaipėda, 11.2% – in Šiauliai and 13.5% – in Panevėžys.

“The overall activity of the Lithuanian housing market has been in the negative zone for twelve months in a row – the number of residential property transactions has decreased on a year-on-year basis. According to the State Enterprise Centre of Registers, in February 2023 around 1,740 older apartments were sold in Lithuania, 15% less than in February 2022. This shows that a significant number of potential home buyers have postponed their home purchase plans or are taking time to make such decision. This has led to a freeze in apartment sale prices, which has remained unchanged in the major cities for the fourth month in a row.

Despite the significant slowdown in the housing market, sellers are still able to sell their properties at record high prices, however it takes significantly longer to sell properties than before. Meanwhile, those who wish to sell their homes faster must seek a compromise with potential buyers and, in most cases, reduce the price. But time is not on the sellers’ side at the moment, as potential home buyers are concerned about still rising interest rates, which not only increases the cost of servicing the existing mortgages, but also reduces the affordability of the home they plan to purchase. According to the latest data of the Bank of Lithuania, in January 2023, the interest rates for newly issued housing loans stood at 4.7%, more than a two-fold increase since mid-2022 (2.52 percentage points). Regardless of the European Central Bank’s response to the recent tensions in the US and European banking sector, the existing and new borrowers have not yet felt the full burden of rising interest rates. The potential home buyers are quite sensitive to significant changes in the financial market and the country’s economy, so it looks like in the near future they will continue to be extremely cautious when making decisions about the most expensive purchase in their life,” noted Raimondas Reginis, Head of Market Research for the Baltic Countries at Ober-Haus.