BNN ANALYSES | Lithuania’s real estate market loses steam, but are doldrums ahead?

Linas Jegelevičius
To buy, wait a little or just shelve the flat purchase plan for now? After surging in 2021 to all-time records, Lithuania’s real estate (RE) market loses steam in 2022.
According to the country’s Registry Centre, real estate transactions in Lithuania slumped 18 percent on year so far, and the gloom can extend well into 2023.
«The present decline in the number of real estate transactions is attributable to potential buyers having adopted a wait-and-see approach as price records have turned to decline and a correction in prices is expected across the market. Particularly new project developers are concerned about the situation, as many of them are developing their real estate projects or are completing them having taken credits. However, due to high construction costs, the do not reduce their prices. Not yet,» Regina Lingė, a Palanga-based realtor, told BNN.

Until November, almost 110 thousand real estate sale transactions were completed in the country, down 18 percent from a year ago, when the number was 134.3 thousand.

In October of this year, 11.2 thousand such deals were registered, 20 percent less than in October 2021, but three percent more than in September of this year.
Of 29.1 thousand RE deals signed in October, almost 10 thousand were registered in Vilnius, a 13 percent slump on year. So far, the number of apartment transactions in Kaunas decreased by 15 percent during the year and in Klaipėda it was down 17 percent.
«Recent data of the residential real estate market show that in autumn, in the primary apartment market, buyers pushed the brakes down and the number of new apartment purchase agreements fell to a very low level. According to our data, only slightly more than 270 apartments were sold in the primary market of the country’s capital city in the third quarter of 2022. The last time such low activity in the primary market was recorded only in 2012 and in 2020 during the first wave of Covid-19. Meanwhile, in the secondary market of older apartments, sales volumes have remained quite high,» Raimondas Reginis, Head of Market Research for Baltic Countries at Ober-Haus, a major RE market player, told BNN.
«Speaking about the sales prices of apartments, we do not see any obvious negative changes, except for the declining expectations of some sellers, who are no longer as optimistic as before, and, in some cases, slightly lower sales prices. Looking at the sales prices of the transactions for apartment sales actually registered in recent months, the prices in the housing market remain at the peak. For example, when analysing the largest apartment segment in Vilnius – older apartments in residential districts – their sales prices have already exceed those in the previous peak in 2007–2008,» says R. Reginis.
«Generally speaking, after a particularly rapid increase in home prices in 2021–2022 (at least in Vilnius), prices of all home segments have hit the highest point in the history of the country,» he added.

According to the State Enterprise Centre of Registers (SECR), only the segment of not-new housing market is doing quite well.

Yet the SECR says this year’s results, although on lower side on year, still are close to those recorded even before the pandemic  in 2019.
«It can be said that the activity of the real estate market is currently back to 2019. Throughout 2020, the activity of the real estate market was limited by the influence of the pandemic and the quarantine, but later in 2021, the volume of transactions quickly jumped up and we set all-time records. This year, we see an L-shaped curve so far – we record a negative annual change, but we can say that the market activity has stabilized,» says Paulius Rudzkis, data analyst at the Register Centre.
However, when it comes to the real estate prices, they were clearly upward for the last year. The apartment prices in the major cities of Lithuania have increased by 22.7 percent over the last 12 months, Ober-Haus says.

Meanwhile, month-on-month, in September 2022, apartment sales prices increased by 2,4 percent in Vilnius, and the average price per square meter reached 2 504 euros per square meter.

«In the high inflation environment where not only real estate prices, but also the prices of all other goods and services are rising rapidly, fitting out costs, which often make a significant part of the real estate price, have an impact on the final sales price of real estate,» says R. Reginis.
«Recent increase in the prices of fitting out materials, furnishings and repair works is also reflected in home prices. For example, buyers pay more than 2 500 euro/sqm for a newly fitted out apartment in an old apartment building in a typical residential area in Vilnius. A year ago, nothing of the kind was recorded. Therefore, despite a marked decline in optimism in the residential real estate in recent months, we still see the inertia of expectations formed in 2021,» the analyst added.
It seems that the majority of RE brokers brace for gloomy months ahead. A recent survey of brokers shows that 59 percent of them believe that housing prices in Lithuania will decrease by up to 10 percent in the next six months, and there was not a single one who believed that prices would rise.
When asked to assess the activity of real estate buyers and sellers in the market, the surveyed brokers did not paint the situation in very dark colours – in fact, most respondents rated the real market activity as average, yet noted that buyers are currently less active than sellers.
«The mood of potential real estate buyers is clearly impacted not only by the general economic gloom arising from very high inflation, the pessimistic forecast for real estate market in general, but (is impacted) also by geopolitics, the war. We all need to wait for better times,» Regina Linge concluded.