“Despite the fact that as a result of external factors the economy of the country was growing slower last year, in comparison with the previous years, it had no essential influence on household expectations and consumption – the main driving force of the economic growth. There is a certain uncertainty in the prospects of global economic growth, however, the consumers’ purchasing power should become stronger and the economic growth in the country should accelerate with the exports redirected to new markets, recovering business investments, continuing growth of wages, and even positive inflation
”, – stated Tomas Varenbergas, the Director of Šiaulių Bankas Markets and Treasury Department.
“More active late 2015 has led to better expectations in the secondary housing market, where an increase in apartment prices by 4-8 percent was observed in Vilnius, Kaunas, Klaipėda and Šiauliai. The prices of apartments in Panevėžys and Alytus were growing less – by 2-3 percent, meanwhile the prices in smaller towns have remained stable. The prices of private houses have not changed in Lithuania in a year”, – stated Arnoldas Antanavičius, Head of Investing and Analysis Department of “Inreal”.
In 2015, the number of new-construction apartments offered by RE developers in all cities was lower than a year ago. There were about 3,650 new apartments offered in Vilnius, i.e. by 24 percent less than a year ago; 114 apartments in Kaunas, i.e. 4.8 times less than a year ago; 176 apartments in Klaipėda, i.e. by 33 percent less than a year ago; and 132 apartments in Palanga, i.e. 3.8 times less than a year ago. According to the analysts of Inreal, the shrinking supply of new apartments allowed some developers to increase asking prices insignificantly. The prices of economy class apartments in Vilnius increased by 7.5 percent, up to 1,304 EUR/sq.m, meanwhile, due to a more active competition the prices of mid- and luxury-class apartments have remained unchanged, respectively: 1,696 EUR/sq.m and 2,539 EUR/sq.m. As a result of lower competition in Kaunas, the prices of new-construction economy-class apartments have increased by 2.3 percent up to 1,046 EUR/sq.m, and by 7.6 percent in the economy-class segment, i.e. up to 1,402 EUR/sq.m. Despite the less active competition in Klaipėda, insignificant correction of new-construction apartments was not avoided – the prices of mid- and luxury class apartments went down by approx. 1 percent, up to 1,297 EUR/sq.m and 1,950 EUR/sq.m, respectively. The only economy-class segment maintained stable prices of new apartments, i.e. 1,162 EUR/sq.m. Less active competition among the RE developers in Palanga allowed them to increase the prices of economy- and mid-class apartments insignificantly: by 2.3 percent up to 1,067 EUR/sq.m and by 0.9 percent up to 1,561 EUR/sq.m, respectively. The prices of new apartments in the luxury-class segment have remained stable – 2,323 EUR/sq.m. .
“We forecast that, in 2016, the RE developers will be less active in the capital city, i.e. they should supply the market with about 3,000 new apartments, meanwhile the demand will depend on external factors – the influence of Russian, Chinese and other problematic economies on our economy. Vilnius is distinguished by a very strong internal demand, therefore, it is possible that the market will remain active in 2016, what allows expecting the increase in RE prices by 3-4 percent at an average”, – stated A. Antanavičius. On the other hand, according to the analysts of Inreal, in 2015, the demand in other cities of Lithuania was much weaker even with lower level of prices, however, it is observed that residents’ become more interested in investing in RE, therefore, in 2016, we should expect the activity to grow in other largest cities as well. It is difficult to distinguish reasons for activity of housing market to grow in smaller towns, thus the level of prices will likely remain stable.
Vilnius stood out in the segment of business centres – five new business centres were opened: Premium, One, Sostena BC, k29, UNIQ. They have supplied the market of modern offices in Vilnius by approx. 37,600 sq.m GLA. In 2016, at least 4 new modern business centres will be offered for Vilnius market; they will supply the market with approx. 66,900 sq.m GLA. In early 2017, the market will also be supplied with another 4 business centres, which will offer 47,500 sq.m GLA. “Obviously, Vilnius should expect for the record-breaking GLA of new business centres, meanwhile the doubts are raised whether such an active expansion of business centres does not provoke vacancy rates to grow and lease prices to be corrected”, – stated A. Antanavičius. On the other hand, there is no strong reason for this, because the majority of business centres, which are currently being built, are rented out successfully by the end of their construction and the majority of their lessees are strong foreign companies, which are expanding their activities and offer new jobs.
The increase in retail volumes, decreasing unemployment and growing wages allow us assuming that a moderate growth of retail trade should be further observed. In 2015, there were four new shopping centres opened in Lithuania, three of which supplied Vilnius market with 27,600 sq.m GLA; and one in Panevėžys, which added 1,600 sq.m GLA. In 2016, it is expected to open four newly built or expanded shopping centres: three in Vilnius and one in Kaunas. Although the vacancy rates in shopping centres have increased insignificantly, but they remain particularly low, i.e. not exceeding 3 percent, what allows the managers of shopping centres to hold better positions in negotiations and increase lease prices moderately.
In 2015, increasing vacancies were observed in warehousing lease segment in the largest cities of the country. Vilnius has maintained a stable level of vacant premises, despite the fact that two new logistics centres, which added 25,000 sq.m GLA, were opened in Vilnius in 2015. Vacancy rates in Kaunas and Klaipėda have become worse, what allows expecting them to grow further in 2016; and this, in turn, will increase the pressure on warehouse lessors and impede the expansion of logistics centres.
Regardless of decrease in tourist flows from Russia, in 2015, the occupancy rates of Lithuanian airports and hotels have continued to grow in the hotel segment, presenting favourable conditions for the segment to grow in Lithuania. Meanwhile, further expansion is also expected for 2016. In 2015, there were 6 hotels built or reconstructed in Lithuania. In 2016, it is expected to open 4 new hotels in Vilnius and one in Klaipėda. In comparison with 2014, the rents have increased insignificantly; however, the expansion of hotels is stimulated by the increasing occupancy rates in Lithuania, which reached the limit of 50 percent in 2015.
In 2015, several essential key changes were introduced in the regulatory framework governing the RE market made in legal regulations related to the RE market; it’s likely that they will have an influence on the further development of the market, and the residential housing segment in particular. Firstly, the amended Responsible Lending Regulations adopted by the Bank of Lithuania came into force on 1 November 2015; they strengthened the requirements for credit institutions in issuing loans to acquire residential housing. Besides, the Law on Credit Agreements Related to Immovable Property should come into force in spring of 2016; it transposes the Housing Directive, setting out the basic terms and conditions for issuing credits to acquire residential housing. In addition, a duty to construct buildings with Class-A energy efficiency should have come into force since the beginning of 2016; however, due to the market situation, the deadline was postponed to 1 November 2016.
“Undoubtedly, all such new requirements will definitely have an influence on real estate developers and purchasers of residential housing. Increasingly restrictive requirements for financial institutions – the main lenders for residential housing – will reduce borrowing opportunities for consumers; meanwhile, a higher energy efficiency class will raise the cost of newly developed RE properties,” stated Simona Oliškevičiūtė–Cicėnienė, Head of Cobalt’s Real Estate Infrastructure practice group.
The most important legislative developments include the application of reverse charging of VAT on construction works, a revised procedure for payment of RE tax and new duties for developers to register unfinished construction. We can only guess what changes we will face in 2016, but apart from the transposition of the Housing Directive, we should expect an amended Law on Protected Territories slightly alleviating restrictions related to real estate development in protected territories early this year, and revised solutions related to the Curonian Spit National Park Management Plan in the second half-year.