Citus experts: good news in the Vilnius housing market in May, with developers showing courage and buyers being cautiously optimistic

May in the primary housing markets of the three major cities was marked by different sentiments; however, the largest market, the capital, experienced an optimistic month. Although the number of transactions in March was not surpassed, it was better than in April, similar to the levels seen in January and February. Meanwhile, the housing supply saw a record increase.

Šarunas Tarutis at CITUS.
Šarunas Tarutis at CITUS.
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Jun 7, 2024, 4:58 PM, atnaujinta Jun 7, 2024, 5:01 PM

A total of 246 preliminary contracts for purchasing new dwellings (apartments and terraced houses) were executed in Vilnius last month, according to preliminary data from Citus analysts. In April, 200 contracts were finalised, compared to 252 in May a year ago. This is a good result after a drop in demand in April, possibly caused by unfulfilled expectations of a fall in Euribor. By the way, the six-month Euribor rate, the most relevant for home loan borrowers, is now back to its level of the early summer of last year and is at its lowest level in almost 12 months, at 3.745% on the last day of May.

But the most significant change in Vilnius’ primary housing market last month was in the supply. In just one month, four new projects and four stages of previously started projects were launched, totalling an impressive 745 dwellings: 727 apartments and one new project featuring terraced houses.

The number of new housing units in Vilnius currently stands at 5,534, 12% higher than a month ago, 28% higher than at the beginning of the year, and 24% higher than a year ago.

Šarūnas Tarutis, Head of Investment and Analysis at creative real estate projects’ development and placemaking company Citus: ‘We see an improvement in market expectations. This indicates that businesses are positive about the current situation, the state of the economy and the outlook for growth in the housing market. There is no more discussion about projects being delayed, postponed or changed, which is an optimistic indicator. Consumers in the housing market, in particular, are more cautious for now, although other sectors are already recovering. This recovery is also expected to be evident in the real estate sector. It could happen as early as June when everyone is waiting for the European Central Bank’s expected decision to cut interest rates’.

He emphasises that in May, the consumer confidence index – monitored by the State Data Agency – increased even further: it now stands at +6 points, a level last seen in the summer of 2019. Consumer expectations are influenced by many factors, one of the most important of which is the ratio between inflation and purchasing power, which also shows improvement. The optimistic sentiment catalyses domestic consumption, but high interest rates are still dampening the housing market.

Tarutis elaborates further: ‘Nevertheless, considering the highly compressed demand – the number of potential buyers who need housing but are postponing the decision to purchase – the increase in supply is an excellent sign. It will prevent a supply vacuum and rapid price increases, thus improving affordability due to rising wages and better financing conditions. This, ultimately, should get the stalled demand train moving again, as the objective barriers to this are systematically decreasing. It is important for people to make decisions rationally, driven by need rather than the fear of missing out’.

In the capital, the average price of apartments in supply adjusted downward in May, from EUR 3,376 to EUR 3,337 per sqm. This constituted a monthly change of 1.16%. Since the beginning of the year, prices have increased by 1.12%, and 3.06% compared to May of last year.

In May, 19 transactions were completed in Vilnius and Kaunas within projects managed by Citus. Most preliminary agreements – ten – were made in the recently launched project Mūnai by CITUS. Additionally, five sales occurred in Kaip Niujorke by CITUS, three in Miško Ardai by CITUS, where the last apartments are available in the third and final stage of the project. In Kaunas, one transaction was completed in Radio City by CITUS, where only three units remain in the project’s first stage.

The company currently has 275 housing units in its supply. Of these, 171 apartments are in Vilnius, where the new project Ežero Takais by CITUS, launched just recently, with 78 apartments, has already been included. Additionally, 66 apartments remain in the Druskininkai project Nemunas by CITUS, and 26 apartments remain in the newly launched project Nidos Bangos by CITUS.

In Kaunas and Klaipėda, changes in May were less pronounced. The much smaller housing markets in these cities have shown sluggish dynamics. The monthly performance tables and demand graphs in both cities show similar figures; however, supply has been increasing there as well.

In Kaunas, 50 transactions were finalised during the month, which is about 14% fewer than in April (58) and comparable to the same number in May last year (49).

Supply increased from 816 units at the end of April to 965 units, an overall increase of 18.3%. As many as 187 apartments in three projects and one new stage of an earlier started project were added to the pipeline. This was also the most significant increase since May last year, possibly indicating that a recovery of the temporary capital’s housing market is also to be expected.

The average prices of apartments on the market in Kaunas, statistically, decreased by 3.07% – in May, it amounted to EUR 2,620 per sqm, and in April, EUR 2,703 per sqm. Since the beginning of the year, the growth has been recorded at 0.73%; over 12 months, it has contracted by 1.39%. Thus, house prices in Lithuania’s second-largest city remain stable with negligible changes.

In Klaipėda, nine transactions were completed during the month (compared to seven in April and sixteen a year ago). The supply in the port city has increased by almost 6% since April – from 539 to 571. A year ago, the stock of new dwellings was 481, an annual growth of 18.7%. In May, two new projects, comprising 38 apartments, were launched in the city.

Average apartment prices in Klaipėda decreased slightly (0.8%) and settled at EUR 2,214 per sqm. In the longer term, there is a slight decrease: 0.2% since the beginning of the year and 2.08% in twelve months.

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