REVIEW OF ECONOMIC AND RE MARKET 3rd QUARTER OF 2014
The increase in transactions in the housing
market fizzled out and it seems that the ceiling has been reached for some
time. There were 7,549 apartment transactions concluded within the third
quarter, i.e. 0.7 percent more than in the corresponding period a year ago. The
increase in private house transactions reached 3.2 percent (3,382
transactions). Nevertheless, the developers of real estate are not reducing the
pace, therefore a more pronounced imbalance between the demand and supply is
formed in the market, especially in the capital city.
The amount of apartments
unsold (vacant or reserved) in Vilnius is reaching almost 4,000 – this is a
record-breaking amount of unsold apartments. However, sale statistics shows
that currently existing supply could be sold out in the period of 1.27 years,
averagely, and this index is still quite good. Unfortunately, the trends show
the decline of this index, thus adequately it means the upcoming challenges and
higher competitiveness for RE developers. If this index exceeds 2, more
reductions of RE prices may appear. If this index fluctuates about 1.5, the
prices in the market are stable. In addition, much also depends on the
developers’ experience. Since the apartment sale statistics shows that the
old-timers of the market sell their projects twice faster than newcomers,
therefore one may assume that it will be difficult to compete for less
experienced RE developers. The competitiveness should mostly prevail in the
economic-class segment, where the amount of transactions has decreased rapidly
from 719 apartments, sold in the first quarter of 2014, to 210 apartments, sold
in the third quarter. Meanwhile, the sale of upper class apartments has
remained stable in comparison with the first quarter of 2014, and even went up
by 10.1 percent in comparison with the corresponding quarter of 2013. It is
likely, that the purchasers of the economic class apartments could return in
the event of less geopolitical tension and risks related to it, because many
transactions are concluded in this segment through borrowing funds and the
purchasers are particularly sensitive to different external factors.
Despite the increasing
supply of new apartments, the prices in the primary market are not decreasing,
because the liquidity rate in the market remains rather high. At the end of the
quarter the total average rate of new construction apartment prices in Vilnius
reached about 5,460 LTL/sq.m. and has increased by approx. 9 percent over the
last year. The total average rate of new construction apartment prices in
Kaunas has increased by approx. 4 percent over the last year and reached 3,850
LTL/sq.m. At the end of the quarter the average price of new construction
apartments in Klaipeda reached about 4,290 LTL/sq.m., i.e. by 2 percent more
than a year ago. The highest increase in asking price of new construction
apartments was in Palanga, where the prices have increased by 13 percent and
reached about 5,840 LTL/sq.m.
In accordance with the
data of the SE Centre of Registers, there were 6,867 land plot purchase-sale
transactions registered in Lithuania in the third quarter – i.e. by 25.8
percent less than in the corresponding period last year. The former volumes of
land plot purchase-sale transactions, registered in 2013, probably will not be
achieved in the near future, because due to complex procedures for purchasing
agricultural land, which covers the majority of all land plot transactions, the
alternative of long-term lease of land has become more popular. Meanwhile,
residential land plot purchase-sale transactions showed an impressive growth:
the annual increase of land plot transactions in Vilnius, Kaunas and Klaipeda
regions reached 51, 50 and 37 percent, respectively. This shows a growing
willingness of people to settle in a private area, located in peripheries of
the major cities.
The
demand in the commercial property market both in business as well as trade or
logistics segments has been growing and vacancy rates have been decreasing
further. Actually, the lease prices have remained stable. It was resulted by
new developed projects mostly, which are stimulating competitiveness among the
lessors and counterbalance the possible increase in lease prices. As regards
the segment of logistics centres, one should additionally mention the trading
constraints applied by Russia, which affected this segment the most; however,
it seems that it did not result in negative consequences.
