Analysts at Citus suggest that this significant growth is mainly due to improving housing finance conditions and high expectations, encouraging more people to consider purchasing a new home. According to data published by the State Data Agency (Valstybės duomenų agentūra – VDA), the consumer confidence index remains very high (in urban areas, it was still six in January). The survey on intentions to buy or build a house, flat or holiday home for example (also VDA data) shows that 8% of urban dwellers are definitely or possibly planning to do so for some time – such a level of intent was last seen only during the 2020–2021 period.
Eglė Savostė, Head of Analysis at Citus, says:
We started similarly 2021 with a new record every month. It is worrying because the last months of the year indicate that we may continue to see demand grow by leaps and bounds. A couple of months ago, we emphasised that consistent and moderate growth would be much better. Otherwise, the market would become unbalanced. However, expectations seem to have fallen, inertia and the fear of missing the market train have reappeared.
She notes that analysts have also observed so-called clusters, where at least one project has recorded more than 100 sales, that likely took place over three months rather than at once. However, according to her, January’s results remain robust even considering this factor. Moreover, previous months’ results have also been improving: in November, the number of transactions likely exceeded 400, while in December, it surpassed 500.
On a very positive note, market supply has also increased rapidly. In just one month, 1,004 new apartments were added to the stock of four new projects and the same number of phases of previously launched projects. It represents more than 25% of last year’s total supply, bringing it up by 6.6% since the end of the year, and by almost a third to 5,692 dwellings since January the previous year.
Savostė emphasises:
Developers communicate big ambitions, plans and investments, but we must understand that these will take time to materialise. The strong start to the year is encouraging and suggests that the first half may be stable in supply, preventing additional price pressure until mid-year. However, if there are no significant changes to reduce bureaucracy, housing affordability could become unstable later on.
The overall price level of apartments on offer in the capital city grew by 3.25% in January, which is faster than Citus analysts recorded in the previous months: since the end of December, when the average price per sqm was EUR 3,472, it has risen to EUR 3,585, which is 6.95% for the year.
Savostė continues:
In January, the market was so active that discounts and big incentives became a trend of the past. But we are already seeing a clear increase in prices. Prices rose unevenly across different projects, some even experiencing slight downward corrections. However, in some cases, 5–8% increases were recorded. On average, prices grew by 3.25% in just one month and at this rate, annual growth could reach 30–40%, which could once again abruptly halt the market and make housing significantly less affordable.
In Kaunas, demand for housing also jumped sharply – 129 new apartments and terraced houses were sold. This is also the best result in the last two years, double last year’s average monthly sales rate. The last time a higher result was recorded was in May 2022. January’s transactions were almost 120% better than in December, and 16% better than in January a year ago.
Demand in Klaipėda was higher than in December last year, with 34 transactions recorded in the port city – up from 30 a month earlier to just 6 a year ago. However, this result does not stand out significantly from last year’s overall trends, although it is above the 12-month average.
In January, supply in Kaunas and Klaipėda also went in opposite directions: in Kaunas, it increased quite a lot – two projects and one stage, 175 apartments in total, bringing it up to 1,043 (6% more than in December and 16.4% more than in January last year); while in Klaipėda, it consisted of 458 dwellings (6.5% fewer than in December and almost 15% fewer than in January last year).
The average prices of apartments on offer have changed similarly over the month – very slightly. The change amounted to only about 0.1%, rising to EUR 2,828/sqm in Kaunas and EUR 2,334/sqm in Klaipėda. The year-on-year change in both cities was more pronounced: 8.35% and 4.95%, respectively.
Savostė concludes:
I sincerely hope that the avalanche will not move, that growth will remain steady with the number of transactions staying at a similar level for a long time. This will also benefit developers because the current result is excellent. However, if no thought is given at the national level to loosening the grip of bureaucracy, the problem will catch up, albeit later. For now, I hope the market will balance out, and affordability will remain good, while the falling Euribor and wage growth will help to outweigh the demand pressure on house prices.
*Citus analysts calculate preliminary transactions for purchasing apartments and terraced houses to assess the demand in the primary housing market. Terraced houses are included in this figure because technically, most terraced houses are classified as apartments and are relevant for homebuyers. Also, the current month’s result does not exclude cancellations of market-preliminary contracts, which are usually related to previously concluded transactions and therefore do not reflect the current month’s demand. Sometimes, the sales result is inflated by the simultaneous aggregation of previous months’ sales so that the inflated sales are recorded in a given month. However, larger clusters are recorded, and the data are continuously updated so that the discrepancies even out in the longer term.