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REVIEW OF ECONOMIC AND RE MARKET 3rd QUARTER OF 2014
2014-11-20
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.