Housing market sentiment is better, but this does not change price trends

The Ober-Haus Lithuanian apartment price index (OHBI), which follows changes in apartment sale prices in the five biggest Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys) increased by 0.3% in October 2024. The annual apartment price growth in the biggest cities of Lithuania was 3.4% (a 3.0% increase was recorded in September 2024).

In October 2024 apartment prices in Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys increased by 0.2%, 0.5%, 0.3%, 0.4% and 0.2% respectively, with the average price per square reaching EUR 2,622 (+5 EUR/sqm), EUR 1,805 (+10 EUR/sqm), EUR 1,713 (+5 EUR/sqm), EUR 1,142 (+5 EUR/sqm) and EUR 1,120 (+2 EUR/sqm).

In the past 12 months, the prices of apartments increased in all the biggest cities in the country: 2.2% in Vilnius, 4.8% in Kaunas, 5.8% in Klaipėda, 3.5% in Šiauliai and 4.3% in Panevėžys.

“Over the last two years, the trend in sales prices has remained broadly unchanged, with overall price levels continuing to rise slowly. We can see that the decline in housing market activity, which has continued for more than two years, has not lowered price levels, but has led to a marked increase in the period of home sales and a slowdown in the rate of price growth. Most sellers have adapted to the changed market situation by waiting patiently for buyers or by stopping the sales process altogether, and only a small number of sellers, especially those willing to sell faster, have had to give significant discounts to homebuyers.

However, the figures for the second half of this year have already given hope to home sellers that the period of the lowest market activity is behind them. October is the fourth month in a row when the number of flats and houses sold in the country has increased compared to the same period a year ago, indicating that buyers have started to make more active decisions on home purchases. According to the data of the State Enterprise Centre of Registers, in October this year the number of purchases of housing (apartments and houses) in the country was 19.4% more than in September this year and 20.2% more than in the same month a year ago. At the same time, October was the most active month on the housing market since the end of 2021.

However, despite the housing market recovery that is beginning to be recorded after a long pause, there is still no greater optimism in the housing market and buyers remain cautious and reluctant to make quick decisions or to overpay for a home. The steady decline of EURIBOR from the end of 2023 has given optimism to market participants, but homebuyers should have first seen a real reduction in the servicing burden on future or existing mortgages. If we look at newly issued mortgages, according to the Bank of Lithuania, the average interest rate on newly concluded mortgages has fallen by almost one percentage point over the year – from 5.79% to 4.85%. Meanwhile, interest rates on existing mortgages, and thus loan repayments, are not falling as fast as most people prefer to recalculate interbank interest rates (EURIBOR) every 6 months. The pace of recovery of the housing market will probably depend on how quickly the majority of potential buyers actually feel that mortgage loans are easier to service.

In the meantime, house price dynamics remain favourable for homebuyers. In 2024, the average annual change in the sale price of apartments in the country’s major cities will be one of the lowest in the last eight years,” says Raimondas Reginis, Ober-Haus Research Manager for the Baltics.

Full review (PDF): Lithuanian Apartment Price Index, October 2024