No Factors on the Housing Horizon to Stop Rising Prices
The Ober-Haus Lithuanian apartment price index (OHBI), which records changes in apartment prices in the five major Lithuanian cities (Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys), increased by 1.7% in November 2021 (1.6% increase was recorded in October 2021). The annual apartment price growth in the major cities of Lithuania was 22.2% (the annual apartment price growth in October 2021 was 20.8%).
In November 2021 apartment prices in the capital grew 1.8% with the average price per square meter reaching EUR 2,065 (+37 EUR/sqm). Apartment prices in Kaunas, Klaipėda, Šiauliai and Panevėžys grew by 1.9%, 1.5%, 1.4% and 0.7% respectively with the average price per square meter reaching EUR 1,442 (+28 EUR/sqm), EUR 1,377 (+21 Eur/sqm), EUR 925 (+13 EUR/sqm) and EUR 907 (+7 EUR/sqm).
In the past 12 months, the prices of apartments increased in all major cities: 23.6% in Vilnius, 21.8% in Kaunas, 19.0% in Klaipėda, 20.8% in Šiauliai and 20.1% in Panevėžys.
“This year, buyers faced an especially unfavourable situation in the country’s housing market and its main cities which determined that apartment prices continued to grow. First of all, the high customer activity has dramatically reduced the supply of apartments in the big cities, in response to which developers have noticeably increased the prices of apartments offered for sale. Those who are looking for cheaper alternatives, must look at older construction apartments where prices are growing slightly slower in the main cities compared to the prices of newly built apartments. In the context of a fast-growing economy with almost double-digit inflation and the growing apartment prices, it looks like customers are tending to buy housing for their own use or for investment purposes as soon as possible.
Apart from the factors noted above, the housing market is also promoted by quite attractive borrowing opportunities which traditionally is one of the major driving forces of the housing market. According to the latest data of the Bank of Lithuania, the average annual interest rate of new housing loans in October 2021 in Lithuania was 2.07% and was the lowest interest rate since the end of 2017. For this reason, it is no surprise that the volumes of new housing loans are vast. In the ten first months of 2021, the number of new (real) mortgages issued in Lithuania amounted to EUR 1.6 billion or 46% more than in the same period in 2020, and 47% more than in the same period in 2019.
It could be stated that all the factors that have a direct impact on the housing demand have aggregated in one place and provoked the steep growth in prices. Apart from the reasons mentioned above, the demand for housing is increasing due to growing wages, internal and external migration to the main cities, and positive expectations of residents. The worst thing for buyers is that no new factors which could limit the growth of housing prices in the near future can be seen”, Head of Market Research for Baltic Countries at Ober-Haus Raimondas Reginis noted.
Full review (PDF): Lithuanian Apartment Price Index, November 2021