The apartment houses are aging extremely fast in Lithuania

June 26, 2013. Aging is one of the most relevant problems of the apartment houses in the country. A decade before, in late 2002, the age of almost two thirds (64 percent) of apartment houses in Lithuania was less than 30 years. In late 2012 this rate decreased to 40 percent.

“If the construction rate of new apartment houses are maintained similar to the rate of the last decade, it is likely that in late 2022 only 17 percent of apartment houses in Lithuania will be less than 30 years old, and the apartment houses, older than 50 years, will make the third part of the entire fund”, - states Arnoldas Antanavičius, the Manager of Consultations and Analysis Department of Inreal. According to him, about 7 percent of the apartment houses (about 11,200 apartment houses) will be more than 70 years old, some of them will be of emergency state or inappropriate for exploitation.

The statistical analysis shows that the peak in the development of apartment houses in the country was in 1960-1990, when a rapid expansion of cities resulted in registration of 650 new apartment houses with a total area of approximately 1,15 sq. m., annually. Since 1995 the rates of new apartment house construction in Lithuania has decreased significantly. Within the recent 10 years the average number of apartment houses, built every year, has been 100 buildings with a total area of 295 thousand sq. m. If similar construction rates are maintained for the next 10 years, in late 2022 the fund of apartment houses in Lithuania should exceed the limit of 53 million sq. m.

The trend of the increase in the average area of apartment houses had been continuing with short breaks till 2009, when this rate in Lithuania had reached 3,530 sq. m. However the economic crisis had adjusted this number significantly. Within the last three years the average total area of new construction apartment houses in the country has decreased to 2,240 sq. m. According to Inreal analysts, it shows that the developers invest much more carefully after crisis, they are developing smaller projects, trying not to freeze too much funds into new constructions and achieve the optimum allocation of available capital. The recovering economics of Lithuania should result in the increasing average total area of new construction apartment houses.

The analysis of apartment houses in every city of the country shows that the lowest rates of aging are in Vilnius. In 2002, 63 percent of all apartment houses were less than 30 years old. In late 2012 this rate had shrunk to 48 percent. If the rates of new apartment construction are maintained similar to the ones of the last decade, it is likely that in late 2022 the percentage of such apartment houses will decrease to 35 percent. The situation in other cities of Lithuania is much worse, because the apartment houses are aging very fast there – within 10 years the apartment houses younger than 30 years old will not exceed the tenth part of the entire fund, except Klaipėda, where this rate should reach 21 percent. The stagnating development of apartment houses in other cities is resulted by poor demographic situation, emigration and a low level of real estate prices. If similar construction rates of new apartment houses are maintained in these cities, in 2022 the fund of 30-year-old apartment houses will reach 11 percent in Kaunas, only 7 percent in Šiauliai, 5 percent in Panevėžys, 9 percent in Alytus, and 8 percent in Marijampolė.

According to Inreal analysts, the aging of the apartment houses is a hardly suspended process. The problem could be partially solved by a massive renovation of buildings, however only 480 apartment houses had been renovated in the country since 2005 – i.e. 60 buildings (0.16 of the entire fund) at an average every year. Since 2013 a more attractive programme of renovation of apartment houses has been introduced in Lithuania. It is expected that the results of this program should be 840 apartment houses (2.24 percent of the fund) renovated in 2014. Even if these ambitious plans are implemented, the numbers are apparently too low in order to solve the problem of aging of apartment houses. Moreover, it is likely that not all apartment houses will be worth renovating, thus a high probability remains that within the upcoming decade some of the apartment houses will need to be demolished. Undoubtedly, these processes will result in further decrease in the demand of old construction apartments, which will lead to lower prices, while the demand of new construction apartments should therefore be increasing respectively.


ABOUT INREAL GROUP

Inreal Group, which consists of JSC "Inreal Valdymas" (Inreal Management), JSC "Inreal" and JSC "Inreal GEO", provides the widest spectrum of services in Lithuania, related to real estate services. Companies of Inreal group belong to AB "Invalda privatus kapitalas". Around 90 employees are currently working in Inreal group, the value of managed assets – about 400 million LTL, mediations in lease or sale of 550 thousand sq. m. of commercial premises and 1150 apartments, and the value of asset, evaluated per year, is reaching 2 milliard Litas. Company offices or representations are operating in Vilnius, Kaunas, Klaipėda, Šiauliai, Panevėžys, Mažeikiai, Alytus, Plungė and Utena.

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Rūta Merčaitienė
Head of Marketing and Communications
INREAL GROUP
Mob. +370 611 29 779
E-mail ruta.mercaitiene@inreal.lt