May 7, 2014. Vilnius. The review of Lithuanian real estate (RE) market trends, drawn up by Inreal Group with its partners, the Law Firm Raidla Lejins & Norcous and Nordea Bank Lietuva, states that a new rise is being observed in the housing market. As a result of further intensification of RE market, the majority of transactions will be conducted “on the basis of drawings”, what allows the RE prices to increase. If such trends remain, the actual increase in RE prices may reach 10-15 percent in 2014. The “renaissance-like” climate is further developing in the commercial sector.
According to the analysts of Inreal, the transaction growth rates, customers’ expectations, actions and growing prices in the housing market of the country, proclaim a new boom in this RE segment. In Q1 of 2014, there were 2,620 of apartment purchase-sale transactions conducted in Vilnius – i.e. by 51.2 percent more than in the corresponding period in 2013. Over the quarter the real estate developers had sold about 1060 new apartments – i.e. even by 2.4 times more that in the corresponding period in 2013.
“If current transaction growth rates remain, more than 4.000 of new construction apartments may be sold this year – i.e., by two-thirds more than in 2013, and as much as during the peak of the previous boom. In the meantime, it was planned to supply the market with 3.000 apartments for this year – by a third more than in 2013, but it is evident that it may be insufficient”, - stated Arnoldas Antanavičius, the Head of Consulting and Analysis Department of Inreal. According to him, the supply of new apartments in the blocks of flats, built in Vilnius, is decreasing overnight – it has shrunk from about 1,165 to 635 over the first three months of this year, therefore the apartments “on drawings” are prevailing in the supply. As a result of further intensification of RE market, the majority of transactions will be conducted “on the basis of drawings”, what allows the RE prices to increase.
The overall rate of new construction apartment prices in Vilnius reached about 5,373 LTL/sq. m. in the end of the quarter and had increased by approx. 8.7 percent over the year. The increase in prices in the new construction segment intensifies the sellers’ expectations in the secondary market, who are expecting to get a price, which is higher by 10-20 percent than 6-12 months ago. “If such trends remain, it is realistic to expect that over 2014 the RE prices in the capital city may increase averagely by 10-15 percent, depending on the segment and the year of construction”, - stated A. Antanavičius.
According to the analysts of Inreal, for the time being the intensification of the markets is being only observed in other major cities and the market of “secondary home” – the number of transactions is increasing and sellers’ expectations as regards prices are growing, while the overall average of prices in the markets remains stable.
The climate in the commercial segments are also becoming better. The market of business centres in Vilnius is experiencing its renaissance – 6 modern business centres (73,500 sq. m. of rentable area) are being built and the construction works of several more centres will be launched in the nearest future. After a 5-year break, the construction works of a business centre for rent had launched in Kaunas. Vacancy rates continued to decrease in all cities, more and more preconditions for prices to grow occur.
In early 2014, the growth of retail trade has been further observed in Lithuania. The growing domestic consumption and the remaining minimum vacancy rate create a favourable environment for investments in the segment of shopping centres – new RE objects are being developed or their development is expected to be launched in all major cities of the country (at least 6 large shopping centres, about 88,200 sq. m. of rentable area in total).
The results of the Lithuanian industry sector, which were decelerated in late 2013, have also been observed in early 2014, however, it should be noted, that the representatives of the industry sector evaluate the prospects of activities for the nearest future more and more optimistically. Intensified investments in the development of logistic centres, which started in 2013, have further continued in the major cities – at least 4 modern logistic centres for rent (about 52,000 sq. m. in total) and at least 8 built-to-suit modern warehouses are being built or are planned to be built.
“As a result of recovering RE market, the amount of residential as well as commercial premises, that are being built currently, is growing, therefore the transactions on unfinished RE, when the purchasers and sellers sign corresponding contracts prior to RE construction completion, is quite a relevant issue at present”, - stated Simona Oliškevičiūtė-Cicėnienė, the Manager of Real Estate and Infrastructure Practice Group of Raidla Lejins & Norcous. According to her, in contrast to the cases, when a finished real estate object is purchased, in this case a purchaser has no possibilities to see and evaluate an actual property – the forthcoming result can be seen only in project documentation. This is one of the most relevant risks, that is faced by a purchaser – whether RE, which is being under construction at the moment of contract conclusion, is going to meet the purchaser’s expectations and be of high-quality.
“When investing, in such cases, it is particularly important to assess the existing situation, as well as consider the possible changes in a longer period, which may have influence on both the structure of income and costs, as well as a long-term value and liquidity of RE”, – emphasized S. Oliškevičiūtė-Cicėnienė.
, consisting of JSC “Inreal GEO”
, JSC “Inreal valdymas”
and JSC “Inreal”
, provides probably the widest spectrum of services in Lithuania, related to real estate. Inreal group companies belong to SC “Invalda privatus kapitalas”. About 90 employees are currently working in Inreal group; mediations in lease or sale of more than 550 thousand sq. m. of commercial premises, over 1000 residential housing objects, and over 200 land plots. The company mediates in 40 residential housing projects, 22 investment projects, and 2 investment RE portfolios. More than 2000 valuation reports and about 80 consultations (feasibility studies, investment memorandums, and market research) are being drawn up annually. The value of asset of valuation is above 2 milliard Litas. Company offices or representations are operating in Vilnius, Kaunas, Klaipėda, Šiauliai, Panevėžys, Mažeikiai, Alytus, Plungė and Utena. Currently JSC "Inreal Valdymas" develops two real estate projects: houses in Nida "Kopų vetrunges" ("Dunes weathervanes") and apartments and comercial premises in Klaipeda oldtown "Danes uzutekis" ("Danes Bay").„Raidla Lejins & Norcous“
is a leading pan-Baltic legal practice with offices in Tallinn, Riga, Vilnius, and Minsk. Our team of 120 attorneys renders comprehensive legal services to national, regional and international legal entities, including multinational enterprises, governments, international banks and financial institutions. Raidla Lejins & Norcous areas of specialization include M&A, corporate advisory, banking & finance, EU and competition law, real estate and construction, intellectual property, litigation and dispute resolution, and employment law. Raidla Lejins & Norcous offices and attorneys are consistently ranked in the top tier by the most prestigious law firm directories as Chambers Global, Chambers Europe, PLC Which lawyer, The European Legal 500, and M&A intelligence firms. Chambers Europe, one of the most influential Europe’s legal directory, awarded Raidla Lejins & Norcous as Baltic Law Firm of the Year in 2013.“Nordea Bank Lithuania”
belongs to the largest financial services group in Northern Europe. In 2012 “Nordea” was awarded the best bank in Western Europe (The Banker, Financial Times). “Nordea” ranks 20th in the World’s 50 Safest Banks ranking. “Standard & Poor's” rating agency has affirmed Nordea’s AA- rating.
“Nordea” started its operations in Lithuania in 2000. Currently, “Nordea” ranks number four among Lithuanian banks in terms of assets under management and is one of the fastest growing banks providing all main banking services to private and corporate customers. In the corporate customer segment, “Nordea Bank Lithuania” is known as a financial supporter of large projects providing a wide range of individual services for corporate customers.