19 February 2019, Vilnius. In 2018, the activity of the Lithuanian real estate market (RE) was at its peak for the third year in a row. The number of unsold apartments has been increasing in the new housing segment, however the liquidity rate remains sufficiently good – housing available in the country's major cities can be sold within 17-24 months. Favourable economic environment, growing revenues of companies in the services sector, and active development of international and local enterprises determine the fact that, over the past several years, the office segment was particularly active and liquid, and demand for modern offices was particularly high. While the market remains at the peak of its activity, developers are turning towards the logistics and RE sales sectors where significant development is also planned.
In 2018, Lithuania's GDP increased by 3.6 percent and went well above the EU average which remains at around 2 percent. Internal demand maintained a high pace of development. Active retail trade and rapid household consumption were supported by growing wages and moderate inflation, while recovering investments compensated the effect of a more passive foreign trade. "During the third quarter of the previous year, material investments in the country grew by over 7 percent, and the business mood index reached its highest point over the past decade. On the other hand, slowdown in global economic development makes us view the future in a more reserved way", – says Tomas Kipišas, Head of Savings and Investment Products at Šiaulių Bankas.
Housing market. Vilnius housing market remains very active and has been steadily growing. Approximately 3865 new apartments were sold during the year, which is 1.2 percent more than in 2017. Accelerating sales during the second half of the year inspired developers to increase the volume of constructions and offer buyers around 4580 new apartments, which is approximately 5.6 percent more than in 2017. Such activity among developers determined the fact that, at the end of 2018, the number of unsold (available and reserved) apartments in the capital reached new heights – 5300 units. Developers were particularly active in the prestigious segment and offered the market a record number of luxury apartments. The number of unsold prestigious-class apartments in Vilnius was over 1100 by the end of the year, which comprised more than 21 percent of all the primary market supply. There was a more significant increase in the prices in this segment since the beginning of the year. "The liquidity rate of new apartments in the capital calculated by INREAL has dropped from 1.2 at the beginning of the year to 1.4 by the end of the year. This means that, if there are no changes in the supply and demand, it will be possible to sell all new apartments within approximately 17 months. Significantly growing supply provides more options for buyers, increases competition among developers, as well as pressure on prices", – says Head of RE Market Research of INREAL Group Robertas Žulpa.
Kaunas housing market has been steadily growing for 4 years in a row now. In 2018, around 520 new apartments were sold in Kaunas, which is 17.8 percent more than a year ago. Such surge of demand for new apartments was determined not only by positive expectations and intensive development in the commercial and industrial sectors, but also by particularly active RE developers. Approximately 700 new apartments were offered to the market of Kaunas, which is 23 percent more than in 2017. However, this supply significantly surpassed new apartment sales, therefore the total number of unsold (available and reserved) apartments in Kaunas increased by more than a fifth since the beginning of the year. Nevertheless, the liquidity rate remained stable at 1.6. This means that, if there are no changes in the supply and demand, it will be possible to sell all new apartments within approximately 19 months. There were no significant changes in the prices of new apartments in the economic and middle-class segment, while the prices increased by 11.5 percent in the prestigious segment.
Buyers were more passive in Klaipėda primary apartment market in 2018 compared to a year ago, and bought around 310 new apartments. Meanwhile, developers were more active and offered the market around 400 new apartments, which is 16.7 percent more than in 2017. The newly emerged supply surpassed the sales of new apartments, therefore the total number of unsold (available and reserved) apartments in Klaipėda increased by 16 percent since the beginning of the year – up to approximately 640 apartments by the end of the year, thus decreasing the liquidity rate from 1.8 to 2.0 throughout the year. This means that, if there are no changes in the supply and demand, it will be possible to sell all new apartments within approximately 2 years. According to INREAL analysts, if Klaipėda liquidity rate of 2.0 remains unchanged for a longer period of time, conditions for the development of new projects in Klaipėda will no longer be as favourable as before – competition between developers will increase, and there will be growing pressure to decrease the sale prices of apartments which were stable or changed only slightly so far. Compared to 2017, activity in Palanga RE market has slowed down, while activity in Neringa increased, even though the primary market was more passive in both towns.
Commercial RE. In 2018, 5 new business centres were opened in Vilnius, and there are plans to open at least 7 more business centres this year, which would provide around 80000 sq. m. of leasable space. Despite the fact that the pace of development is very high, the demand for modern business centres remains strong in the capital and absorbs almost the entire newly available area. In 2018, the overall vacancy rate in Vilnius dropped from 5.4 percent to 4.8 percent, while the prices remained stable. Over the course of 2018, 11 new business centres were opened in Kaunas which added more than 40000 sq. m. of area to the market. Due to growing supply, the overall vacancy rate in Kaunas has increased from 5.9 to 9.3 percent by the end of 2018. In 2019, at least 7 new business centres will be added to Kaunas market which will offer around 60000 sq. m. of leasable space. New business centres in Kaunas slightly raised the bar for quality and prices. The overall vacancy rate in Klaipėda increased from 9.9 to 10.6 percent. Development of new offices was particularly passive in the port city, since the vacancy rate of modern offices remains very high for several years now, therefore conditions for the development of new offices are not favourable in this city.
"Positive trends and low vacancy rates in the trade and logistics segments encourage RE developers and investors to focus on these sectors. In 2018, the year's largest investment transaction in the Baltic states was concluded in the trade segment, while the development of warehousing facilities and logistics centres intended for lease was very active and will remain to be so in the near future in all of the major cities of the country", – says R. Žulpa.
Last year, the development of hotels was also active like never before. Prestigious and well-known international hotel brands such as Hilton, Marriot, Design Hotels, etc. were opened or will soon be opened in Lithuania. A total of 6 hotels were opened in Vilnius in 2018, and at least 15 new hotels will be established in Lithuania over the next two years which will add around 2000 rooms to the market.
"Lack of changes in legal regulations for several years in a row has at least one positive aspect – stability, which enabled for the practice of application of legal acts to set in. There is still no significant breakthrough in state land management and interinstitutional dialogue, which the players of the RE market are expecting", – says Simas Paukštys, Associate at Law Firm COBALT Lithuania.
ABOUT INREAL
INREAL is a trademark of an idea, which gives spark to unique projects, basis for professional services, and added value to businesses, clients, and partners. INREAL positions creativity as a core value in the dynamic business world. INREAL Group, which consists of: UAB “Inreal valdymas”, UAB “Inreal”, and UAB “Inreal GEO”, provides probably the widest range of real estate services in Lithuania. Currently they have over 90 employees working for them in 11 cities in Lithuania. The company has engaged in business operations for over 20 years and implemented more than 50 real estate projects of various purposes, which received recognition and awards at contests not only in Lithuania but on an international scale as well. In 2015/16, 2016/17 and 2017/18 Inreal Group was named as the National Winner during the prestigious European Business Awards.
More information:
Rūta Merčaitienė,
Head of Marketing and Communication at INREAL GROUP
+370 611 29 779 ruta.mercaitiene@inreal.lt
www.inreal.lt