Martynas Žibūda, head of development at EIKA:
Vilnius’ primary housing market is welcoming the New Year at unprecedented heights: in 2021, the highest number of new apartments sold in history – almost 6,900. This is 41% more than in the pandemic year 2020 and 14% more than in the record-setting year 2019.
With the majority of sales recorded in the first months of the year, the volume of sales steadily declined thereafter. This is likely to have given the impression of a calming market. However, the flame of the housing market has diminished only visually: it has been slowed down by a “fuel shortage” – a lack of new housing projects, with the supply of available apartments shrinking by almost 40% over the course of the year, while the temperature of the flame itself has reached an unprecedented fever pitch, with home prices rising by as much as 25% over the year.
The large imbalance between supply and demand and the resulting accelerating home price growth seems to be the most prominent factor characterising the apartment market in 2021. The more problematic aspect here seems to be not the “unexpected” willingness and ability of the population to buy new housing but developers’ inability to react and offer enough new products. In addition, developers raise the issue of the proliferation of bureaucratic municipal regulation, which has doubled the project’s lead time and, without the capacity to respond to increased demand, has led to buyers being deterred by the higher prices of the remaining housing.
Another factor pushing up the price of housing is the drastic increase in the cost of building and land used for development projects and the new infrastructure and land rent charges. All of these are leading to unprecedented levels of home prices, which are undermining housing affordability and pushing people to rent rather than buy.
In the form of a new housing supply, the first breath of fresh air will likely come in spring 2022, when housing projects on state-owned land, which are not yet subject to tax, will start. They may not reduce home prices, but they should undoubtedly slow down price growth, not to mention increase the number of options available for home buyers.
In the coming year, I wish for there to see less discussion about how to restrict or tax the homebuyer and more focus on creating a more resilient, demand-responsive market: how to reduce excessive bureaucratic red tape, how to create more efficient processes, how to make requirements transparent and uniformly applied to all market participants, and how to adapt the capacity of public authorities to the changing volumes of the market. After all, increased competition and buyer demands best regulate the qualitative parameters of a project, which public authorities are mainly trying to manage.
- The result for 2021 is 6,888 apartments sold, an absolute all-time record for the new housing market in Vilnius, or 41% more sales than last year (4,874 apartments).
- In Q4 2021, 1,277 apartments were sold/reserved in the primary housing market of Vilnius, which is 24% less than in Q4 2020 (1,674 apartments) and 8% less than in Q3 of this year (1,386 apartments).
- During the quarter, 58% of sales were in the economy class, 35% in the middle class and just 7% in the luxury segment. The most significant growth in the year was recorded in the economy class – 61%, in the middle class – 33%, in the prestige class – only 6%.
- The number of mid-range buyers dropped by 34% during the quarter, with 449 units sold in Q4 2021 compared to 678 in Q3 2021. Prestige sales increased by 14% in the quarter compared to Q3 2021 (from 80 to 91), while the highest growing segment was the economy class, with sales increasing by 17% (from 628 to 737).
- In Q4 2021, the number of vacant apartments on the market dropped sharply by 19% and currently stands at just 2,350 vacant apartments on the market. Moreover, the year-on-year decrease in supply is even higher – 38% (from 3,800 to 2,350). Such a low vacancy rate has not been seen on the market since 2014.
- Only 12% of this stock consists of completed and under-construction apartments. The remaining 88%, or nine out of every ten apartments for sale, are still in the midst of the construction and are only visible on blueprints. A year ago, completed and under construction apartments accounted for around 28% of the vacant apartments on the market.
- During the quarter, the number of vacant apartments decreased the most in the middle and prestige segments. The number of vacant apartments decreased by 26% and 24%, respectively, while the supply of apartments in the economy segment dropped by about 10%.
- In 2021, developers offered around 5,440 new apartments to the market compared to new supply in 2020, an increase of 14% (from 4,760 to 5,440)
- In Q4 2021, only 725 new apartments were offered to the market, almost half as many as in Q3 2021, when 1,425 new apartments were launched and sold.
- In Q4 2021, the price of new apartments in Vilnius grew the most in the luxury segment – by 16.1%, while in the economy and medium segments, prices grew by 7.6% and 8.5%, respectively. The price level currently reaches EUR 2,180 per sqm in the economy class, EUR 2,900 per sqm in the medium class, and EUR 4,310 per sqm in the prestige segment.
- As a result of the above price changes, the overall average price of a new home in Vilnius will rise by 7.8% over the quarter, from EUR 2,510 per sqm in October to EUR 2,710 per sqm by the end of 2021.
- In 2021, the price of new housing in Vilnius will increase by almost 25% (from EUR 2,175 to EUR 2,709 per sqm). Economy and mid-range housing increased by a similar 25-26%, with luxury housing appreciating the most, with an annual change of 39% (from EUR 3,100 to EUR 4,300 sqm).