The trend of economic development of the country has not changed – the domestic demand, which is mostly stimulated by private consumption, was growing thus improving the results of economic development in the third quarter. One can expect that this factor will remain as the main cause of economic development till the end of the year. Households have something to be happy about – as a result of economic growth, the number of employed people is growing; if the situation remains, the average wage will be growing fast. Likely, the European Central Bank, not seeing the sustainable economic growth of the entire region and sufficient level of inflation, will already revise the scales of stimulating policies in December.
In the third quarter of 2015, the activity of RE market was further growing in Lithuania. In comparison with the second quarter, the increase in the number of apartment transactions was 13.3 percent; of private houses – 4.3 percent. Market activity has returned to the level of 2014, when a record-breaking level of RE transactions was observed as a result of upcoming euro adoption. Nevertheless, this year the RE market was partially stimulated by stricter regulations on responsible lending approved by the Bank of Lithuania, what resulted in a rush to acquire RE. It could be forecasted that the end of the year will be calmer and market activity will calm down. On the other hand, one should take into account that the geopolitical situation has been quite calm for some time, residents’ income is growing, and thus their expectations remain positive. It can be forecasted that the market will also remain active after the 1st of November, when stricter regulations on responsible lending will enter into force.
In the third quarter of 2015, there were 1,350 apartments supplied to the market in the segment of new-construction apartments in Lithuania, 1,250 thereof – in Vilnius. Developers’ activity in the capital city was not fading out – in comparison with the second quarter, the number of new-construction apartments offered to the market was less by 6.6 percent only. Meanwhile, the developers sold about 950 apartments in the third quarter, i.e. by 10.2 percent less than a quarter ago. The total number of unsold (vacant and reserved) apartments was about 4,880 in the end of the third quarter. Despite the improving macroeconomic indices, the possible growth in housing prices in Vilnius is absorbed by the growing supply and competition among developers. In the end of the third quarter of 2015, the average price of economic class apartments was 1,280 EUR/sq.m., showing an annual increase of 1.1 percent. The average price of mid-class apartments was 1,700 EUR/sq.m., showing an annual decrease of 0.1 percent. The average price of the luxury-class apartments was 2,420 EUR/sq.m., showing an annual decrease of 3.1 percent.
The total level of housing purchase-sale transactions in Kaunas and Klaipeda has returned to the level of 2014, however, if compared with the market of the capital city, the activity has remained ten-times weaker. Actually, Kaunas housing market could be much more active if the city managed to attract more foreign IT and service companies; the demographic issues could be solved and the demand of new housing could grow through well-paid jobs offered by such companies. In accordance with the data of “Invest Lithuania”, Kaunas lost some potential investors due to inability to offer sufficient modern office premises. Being aware of the success story of Vilnius, which started in 2009 with “Barclay’s” and “Western Union”, a similar effect could also be expected in Kaunas if more foreign companies could settle there.
In the third quarter of 2015, Vilnius was dominating in the business centre segment as well – the business centre “k29” was opened on the right bank of the Neris, which supplied the market with approx. 14,000 sq.m. GLA. One more business centre (7000 sq.m.), which is being developed by “Vastint Lithuania”, will be opened in the fourth quarter of 2015. More than 13 modern business centres were being built or are expected to be started in the nearest future, thus Vilnius market will probably have a record-breaking GLA in the next two years – i.e., about 173,930 sq.m. In order to ensure successful take-up, about 17 thousand additional new job places should be established. It is unlikely, that it will be achieved in two years; therefore it is obvious that vacancies will inevitably grow and the competition among the business centres will be stronger.
Growing competition can also be noticed in the segment of logistics centres. In the third quarter of 2015, the number of vacant modern warehouse premises was growing in the major cities of Lithuania. The largest increase in vacancies was noticed in Kaunas and Klaipeda, where vacancies were 21.2 percent and 7.6 percent, respectively. The best result was shown by Vilnius market with the vacancy rate of approx. 3.9 percent. Nevertheless, taking into account the fact that there are at least four logistic centres being built in Vilnius and Klaipeda, which will supply the market with about 37,800 sq.m. GLA, it can be foreseen that the vacancy rate should grow in Vilnius and Klaipeda. Accordingly, it should increase the pressure on rents, although it will be insufficient to expect the rents to decrease. However, the conditions for development of new projects in this segment will not be very favourable in the near future.
Many changes related to the construction of residential houses as well as their acquisition are expected in the Lithuanian real estate market, especially in the segment of residential housing, in the near future. Firstly, the updated Regulations on Responsible Lending, adopted by the Bank of Lithuania, came into force on 1 November 2015. Later, from the beginning of 2016, the obligation to build buildings complying with energy efficiency Class A will enter into force. Finally, no later than by the end of March 2016, Lithuania will have to transpose the Directive of the European Parliament on credit agreements for consumers relating to residential immovable property, also called as the Housing Directive.
“All of these new requirements will unambiguously influence the developers of real estate and purchasers of residential housing. Restrictive requirements to financial institutions, which are the main creditors of residential housing, will complicate the possibilities for consumers to get credits, meanwhile a higher energy efficiency class will probably increase the prices of newly built residential housing”, – stated Simona Oliškevičiūtė-Cicėnienė, Head of Real Estate & Infrastructure Practice Group at “COBALT”.