Citus Experts: The Housing market hasn’t gone on summer vacation yet. The most active half-year in two years and improving affordability

Šarūnas Tarutis, Citus photo
Šarūnas Tarutis, Citus photo

Based on the preliminary data of analysts of Citus, a creative real estate projects’ development and placemaking company, 222 transactions were carried out in the primary housing market of Vilnius in June and 668 in the second quarter. The month and the quarter were not exceptional, but the half-yearly result was abundant – 1,484 transactions for new dwellings (apartments and terraced houses). This result makes the first six months of the year the most significant since the first half of 2022 when 1,751 transactions were concluded. A year ago, in the first half of 2023, there were 1,323 transactions, and in the second half of 2023, there were 1,375 transactions. On average, 247 new dwellings have been sold monthly in the capital this year.

Šarūnas Tarutis, Head of Investment and Analysis at Citus: “Considering that the summer holiday high season has already begun, with plenty of sunny and warm days this year and the extended weekend in June, the results are generally good. Gradually, the conditions for market activity are improving, which we should see later this year. Increasing wages, stable housing prices, and reduced Euribor and bank margins improve affordability. The desire to increase the liquidity of the abundant assortment and ongoing offers opens a window of opportunity for buyers. The ever-growing consumer confidence index, unseen since the second half of 2019, further reinforces these conditions.”

As the expert mentioned, the prices of apartments remain very stable: at the end of June, they reached EUR 3 342/sqm, which is only 0.15% higher than in May (EUR 3 337/sqm), 1.27% higher than at the beginning of the year (EUR 3 300), and 2.70% higher than a year ago (EUR 3 254).

The supply section shows a more pronounced change, with an increase of around 28% over the half-year and 25% over the year, reaching 5,520 new dwellings. During the six months, as many as 2 166 new dwellings in 16 new projects and 13 stages of previously launched projects were offered to the general market. Of these, 2 077 units consisted of apartments and 89 terraced houses.

Šarūnas Tarutis emphasises that up to 9,000 people may be waiting to purchase a new dwelling in Vilnius. Citus analysts have made these calculations based on long-term housing market statistics by evaluating the results of monthly transactions from the beginning of 2017 to the end of 2021 and comparing them with the number of potential homebuyers (employed citizens) in Vilnius. It is important to note that the latter number has increased by 22,000 over the last two years.

It was assumed that 100,000 residents have a monthly demand for around 175 new dwellings and that the normal monthly demand over the last 7.5 years, with population growth, should be around 450-550 transactions. This implies an unrealised demand on the primary market of almost 300 units per month since the beginning of 2022, which will likely result in a demand for 8,975 dwellings over the whole period.

Šarūnas Tarutis: “In our assessment, this is in accordance with long-term data. There have been different periods – more active and less active – and this is natural. However, these dynamics are adjusted by various circumstances, and the balance remains similar. Although some factors, such as wages and overall economic growth, move more significantly and should increase the coefficient, reduced affordability restores the balance. This calculation cannot be completely accurate, as some assumptions and factors cannot be estimated. Therefore, the waiting queue could be longer—around 10,000 buyers is a very realistic number. Such number of people, holding hands, could encircle the Vilnius’ Old Town.”

The secondary market did not compensate this unrealised demand. According to the statistics, its activity has remained almost unchanged: it has been growing steadily since 2017 (as in the primary market) and from around 575 to 795 units/month in 2021. With the downturn in the primary market, the secondary market’s average increased by only 4.15% to 828 units/month in 2022 and then decreased between 2023 and 2024, from 818 units/month last year to 740 units/month so far this year.

Notably, in the first half of 2024, 134 transactions were finalised in projects managed by Citus. This is 41% better than the second half of last year and 17% better than the first half of the year. In June, 36 preliminary agreements were reached, the same outcome as in March, and it was the best result in the last 1.5 years.

101 transactions were made in Vilnius and 8 in Kaunas in the last six months. Furthermore, 16 apartments were sold in the Nemunas by the CITUS project in Druskininkai, and 9 apartments were agreed upon in the Nidos Bangos by the CITUS project, which was launched in June by the Baltic Sea.

The company’s portfolio of managed projects in Vilnius includes 147 apartments, including the last 8 apartments in the project Miško Ardai by CITUS. In Kaunas, 4 last business spaces are left in the project Radio City by CITUS, and in Druskininkai and Nida, 65 and 19 apartments, respectively.

In Kaunas, the first six months of the year saw less activity but more than in previous periods. In June, 59 new housing sales were agreed upon in Kaunas, 167 in the quarter and 404 in the year’s first six months. It was also the best six months in the last two years. The previous half-year, the second half of last year, saw 389 contracts and there were 338 contracts in the same period a year ago. However, Citus analysts have observed that around 20 transactions were concluded earlier but registered only during past month.

Prices in Kaunas are equally stable: they increased by 1.49 per cent in a month, 2.23 per cent over the past six months, and 2.43 per cent in a year. In June, the price of the apartments being sold reached EUR 2 659/sqm.

On the other hand, supply in Kaunas moved in the opposite direction: although it increased by 6.6% since the beginning of the year to 1,018 units, it was 10.07% lower than in the same month last year. In half a year, 310 apartments were offered to the market in six new projects and only two new stages in this city. The supply of terraced houses stayed the same during the year.

Klaipėda also saw a statistical pick-up in demand last month, with June ending with the year’s best result. 48 transactions were recorded during the month, matching the level seen only in October 2022. However, similar to Kaunas, about 20 contracts were concluded earlier than June. The quarter ended with 62 transactions and the last six months with 86. This year’s result is not impressive – in the previous half-year, 135 sales were registered in Klaipėda’s primary housing market, and 139 sales were registered in the half-year before that.

In the port city of Klaipėda, prices have adjusted slightly downward. It contracted by 1.04% in a month, by 1.26% since the beginning of the year, and by 1.66% over the year. In June, the average price per sqm in new apartments was EUR 2 191.

This price adjustment could also be due to the rapid increase in supply, which primarily consisted of more affordable housing. In Klaipėda, the supply jumped by almost 24% to 673 units in the year’s first half. Over the year, the assortment growth was as high as 30%. All the new supplies appeared in the second quarter: three new projects and stages of previous projects were launched in three months, with 216 units for sale – 210 apartments and six terraced houses (1 new stage).

The improvement in affordability was primarily driven not by the decrease in Euribor

Šarūnas Tarutis concludes that the much-awaited Euribor reduction has finally begun. The European Central Bank recently lowered the interest rate by 0.25 percentage points, currently at 3.682%. Then again, the Citus Analysts’ Housing Affordability Index (CITHAI) in the last quarter has improved the most, not because of the decreased Euribor but due to the rapidly increasing wages. For instance, in the second quarter of last year, the Euribor was lower than in the same period this year, but affordability was lower as well.

A single person earning an average wage and buying a home with a loan (CITHAI I) can buy 32.33 sqm in Vilnius, 34.64 sqm in Kaunas and 37.91 sqm in Klaipėda. Under the same circumstances, a couple buying a home (CITHAI II) would buy 61.44 sqm in Vilnius, 65.83 sqm in Kaunas and 72.03 sqm in Klaipėda.

Note: The latest wage data from Sodra was published for April, so this figure is calculated based on the forecasted wage growth.

Since housing prices remained very similar across all cities, affordability has improved. Because the capital saw the steepest wage growth, affordability has improved the most: in the second quarter, compared to the previous period, the CITHAI increased by 6.04%, and compared to the same period last year, it increased by as much as 7.58%. Such growth has not been experienced in a long time, mainly since, in recent years, a decline in affordability has been observed more often for different reasons.

In Kaunas and Klaipėda, these trends amounted to 2.98%, 9.80%, 3.70%, and 8.75%, respectively.

By the way, stable prices over a long period and rapidly increasing wages are approaching historic affordability levels for purchasing a home without a loan—meaning affordability excluding the influence of Euribor. With current primary market prices, CITHAI II without Euribor in Vilnius would reach approximately 96.90 EUR per sqm, in Kaunas around 122.07 EUR per sqm, and in Klaipėda as much as 146.80 EUR per sqm, respectively.

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