New trend in RE – a real competition among apartments and private houses

November 20, 2014. Vilnius. The private house market
review drawn by the analysts of “Inreal” states that the construction paces of
private houses and apartments, which have been going hand in hand in Lithuania
for a long time, turned in different directions during the crisis. The volumes of new apartment construction in the
entire country are barely reaching the historical lows within the period of
independence of Lithuania, meanwhile the record-breaking volumes are maintained
in private house construction segment. Another emerging trend is a reduced area
of new construction private houses, which reached 155 sq.m. in 2014 at an
average. In comparison with 2009, the area is less by 24 sq.m. It is noticed,
that increasingly more private houses, detached houses or cottages with the
average area of 110-130 sq.m. are being built and their total price reaches
about 200-300 thousand Litas – thus forming a real competition for the
apartment segment .

“The situation was resulted by the fact that following
the crisis almost three quarters of all new construction apartments are being
built in the capital city and only a small share in other major cities, where
the RE price rate is still sufficient for the apartment projects to be
cost-effective”, – stated Arnoldas Antanavičius, the Head of Consulting and Analysis Department of “Inreal”. It is not profitable to build apartment houses in smaller cities,
since the price of a new construction apartment would be equal to the price of
a private house, thus the residents in smaller cities, who are looking for a
newly constructed housing, choose private houses.

Private houses are being built in the entire
Lithuania, but the paces are different in each municipality. According to the
area of newly built private houses per thousand residents, Klaipeda region is
in the leading positionapparently.
One may state, that currently Klaipeda region is having a boom of private house
construction, which has started just several years ago. The most popular
territories for development are those closer to the boundaries of Klaipeda city.
Analogous trends are also observed in Vilnius and Kaunas regions, where the
amount of private houses, which are being built, is relatively high, while the
major development is focused in the territories closer to the boundaries of the
cities.

According to A. Antanavičius, the success in the
private house segment is resulted by the fact that the majority of new objects,
which are being built today, covers relatively small private, detached houses
or cottages with the average area of 110-130 sq.m., and the total price is
similar to those of new construction apartments, thus a direct competition
occurs among different segments, where the private house segment usually
prevails.This is a completely
different trend to the one, which had been prevailing during the previous boom,
when the average area of private houses was increasing every year and had
reached 179 sq.m. During the crisis the average area of new construction
private houses has been decreasing, while this year it reached the lowest rate
– about 155 sq.m. It is forecasted that a similar rate should remain till the
end of the year.

Regardless
of a high activity in this segment, the prices should remain stable, because
the supply of land plots for construction of private houses is really high. For
example, the total area of residential land plots in Klaipeda region is
sufficient for establishing another Klaipeda city. Thus, naturally it is
difficult to expect prices to grow due to the excess in supply of land plots
and the possibility to build private houses easily. The attractiveness of this
segment will remain high.