The cumulative effect of several years of housing market activity decline, suggests around 40% lower construction volumes in 2024


Over the past few years in Lithuania, we have seen a rapid decline in housing market activity, which has impacted the volume of new housing developments. However, apartment building developers in the country’s major cities have been facing the toughest challenges lately, with very modest apartment sales figures in the period 2022–2023. According to Ober-Haus, compared to the record activity of 2021, in 2023, the sales of apartments in the primary market were down by 68% in Vilnius, 55% in Kaunas, and 57% in Klaipėda.

“Despite the two- to three-fold decrease in the sales of newly-built apartments, a very high number of apartments were nevertheless completed in the country’s major cities in 2023, because the development of these projects had begun during 2021 and 2022,” said Raimondas Reginis, Head of Market Research for the Baltics at Ober-Haus.

According to Ober-Haus, in 2023, developers in Vilnius built 4,915 apartments for sale – 18% more than in 2022. When considering the last two decades, this is one of the highest figures, second only to those in 2007, 2008 and 2020, when more than 5,000 apartments were built for sale. In 2023, 52 different apartment projects (including ongoing project phases) were available for buyers in Vilnius.

The largest construction volumes of apartments for sale and for rent are concentrated in the capital city Vilnius. Following high development activity in 2022, the property rental segment saw a surge in 2023. Two new rental projects (Solo Society City House Vilnius and Atlas Co-living) were completed there. They offered almost 800 units to the market bringing the total number of professionally managed units for rent to 2,100. Ober-Haus estimates that two more projects will be completed in Vilnius (Vytenio Street and Talino Street) in 2024, offering almost 300 units for rent.

“Since many people in recent years have postponed buying a home, renting remains a relevant and affordable option for many looking for a home. Therefore, the rapidly expanding professionally managed rental segment allows the balance between supply and demand in the real estate market to be maintained,” Reginis explained.

In 2023, construction projects were predominantly developed in the residential districts of Vilnius, while the volume of construction projects in the Old Town of Vilnius was the most modest of the last decade

Developers completed new apartments in 18 out of 21 neighbourhoods within the City of Vilnius in 2023. Slightly more than half of the total number of apartments were built in five neighbourhoods: Verkiai (14.6%), Rasos (10.1%), Pašilaičiai (9.5%), Viršuliškės (8.4%) and Lazdynai (8.7%).

In 2023, very low construction volumes were recorded in the Old Town of Vilnius (0.8%), one of the most modest indicators over the last decade for this area. Reginis notes that in previous years many more apartments were built for sale in the Old Town, due largely to the conversion project in the Paupys district. The real estate development company, Darnu Group, built more than 800 apartments for sale on the former Skaiteks factory site in the period 2020–2022. Other companies also actively developed apartment building projects in Paupys and the adjacent Užupis area during this period. In 2023, however, only a few projects were instigated in the Old Town, some of which took longer than planned or were even suspended. According to the Ober-Haus expert, an increase in supply can be expected in 2024–2026, when the projects currently in progress or planned for the near future will be completed.

For the first time in history, the average size of apartments in Vilnius is below 50 sqm

For the first time during the entire period of reporting on property by Ober-Haus (over 20 years), the average size of apartments built for sale did not exceed 50 sqm. According to Ober-Haus, in 2023, the average floor area of individual apartments in apartment buildings built in Vilnius was 49.9 sqm. For example, during 2020–2022, the average floor area of apartments in newly developed apartment buildings was 52-53 sqm.

“The very small average size of apartments built in 2023 could be attributed to the structure of housing under construction. Often, higher-end projects and projects in prestigious areas of the city offer more spacious apartments, but there were very few such projects in 2023,” Reginis noted.

Looking at other major cities in the country, we can see similar long-term trends to those in Vilnius, i.e. smaller apartments with fewer rooms are built for sale. However, the average floor area is still higher than in Vilnius. “According to Ober-Haus, in 2023, the average floor area of an apartment in residential buildings built in Kaunas was 54.7 sqm and in Klaipėda, it was 54.6 sqm.

A++ energy performance class apartment buildings will dominate in 2025

Although the requirement to comply with A++ energy performance class for new buildings came into force 1 January 2021 (for obtaining a building permit), there were still relatively few such apartment buildings built in Vilnius in 2023. Data collected by Ober-Haus, show that apartments in A++ energy performance class buildings accounted for only 22.4% of the total number of apartments built for sale in Vilnius in 2023 (5.3% in 2022). Apartments in A+ energy performance class buildings accounted for 56.9% of the total number of apartments built for sale in Vilnius in 2023 (70.4% in 2022). Apartments in A energy performance class buildings accounted for 12.3% of the total number of apartments built for sale in Vilnius in 2023 (17.4% in 2022). The remaining apartments (8.4%) were built in B energy performance class apartment buildings or lower (6.9% in 2022).

“Under half of total number apartments will be built in A++ energy class apartment buildings in 2024. This means that the highest energy class apartments will only start to dominate the primary market in Vilnius from 2025,” Reginis commented.

Forecast confirmed, with a record number of apartments built in Kaunas

The forecasts made a year ago concerning record volumes of newly built apartments in Kaunas were fully realised in 2023. According to Ober-Haus, developers in Kaunas built 1,479 apartments for sale in 2023, or a significant 45% more than in 2022. Historically, this is the highest number of apartments built for sale per year in this city. The threshold of 1,000 newly built apartments was only exceeded in 2008 (1,070 apartments) and in 2022 (1,020 apartments). In total, 31 different projects (including ongoing project phases) were offered to buyers in Kaunas in 2023.

In 2023, developers built apartment blocks in various locations in and around Kaunas, but a total of 23% of all apartments were built in the Aleksotas neighbourhood. This was due to the completion of several large-scale projects in this area: the first phase of the Nemunaičiai project in H. and O. Minkovskių Street (around 160 apartments) and the Europos Sodas project (around 130 apartments). Construction was in progress in other districts of the city too: a total of 70% of the apartments were built in the districts of Šančiai, Dainava, Vilijampolė, Žaliakalnis, Eiguliai and the city centre.

Analysis of developers of apartment buildings shows that local companies investing exclusively in Kaunas dominated, while small and usually little-known companies developed smaller scale apartment building projects. “As a result, to continue to improve the transparency of the city’s housing market and to increase the quality or scale of the projects, it is important to attract financially stronger and nationally known developers who are capable of implementing truly ambitious projects,” Reginis explained. YIT Lietuva, Citus, SBA Urban, and others, are some of the companies that continue to actively invest or are taking their first steps in the Kaunas housing market.

The development of various apartment projects exclusively for rent, in addition to projects developed for sale, is one of the qualitative evolutionary steps for the housing market in Kaunas. In mid-2023, the real estate development company, the Etapas Group, completed the construction of five apartment buildings on Žeimenos Street in the Eiguliai district. Three of the apartment buildings were offered for sale. The Estonian capital investment company, Eften Capital, invested in the construction of the other two buildings offering 96 apartments for long-term rent. Ober-Haus estimates that currently there are around 550 professionally managed apartments for rent in Kaunas.

Development rates in Klaipėda remain stable – over 400 apartments per year

According to Ober-Haus, developers in Klaipėda built 402 apartments for sale in 2023 or 14% less than in 2022. There has not been any significant breakthrough in apartment development in Klaipėda for more than a decade. Since 2009, the number of apartments built for sale in Klaipėda has not exceeded 500 apartments per year (the highest number built during this period was in 2022 – a total of 466 apartments). In total, 10 different projects (including ongoing project phases), were offered to buyers in Klaipėda in 2023.

Reginis points out that despite the small volume of developments for apartment buildings, particularly compared to Vilnius or Kaunas, there finally are tangible results in terms of investment in the central part of the city of Klaipėda.

Eriadas, a construction management and real estate development company, is finishing the Parko Pakrantės project near Malūnas Park (4 out of 5 apartment buildings were completed in 2023). In 2023, the company began the construction of the Bastionų Namai project with over 700 apartments near the River Danė (the first two apartment buildings are scheduled for completion in 2024). In the second half of 2023, Stemma Management started the construction of the ambitious Memel City project at the junction of the River Danė with the Curonian Lagoon. The first phase consists of the construction of just over 100 apartments and a business centre. The completion of the first apartment buildings is scheduled for 2025.

“This investment is particularly important for Klaipėda, because the construction of higher-class residential property in the central part of the city can revitalise both Klaipėda’s Old Town and the adjacent areas, where smaller businesses such as restaurants, cafes, services companies, etc. usually operate, and where higher-income residents are their main clients,” Reginis explained.

In general, Klaipėda has not been able to boast any significant positive demographic trends over the last decade. According to the latest data from the State Data Agency, Statistics Lithuania, the number of permanent residents in the municipal area of the city of Klaipėda has increased by only 0.8% over the last decade, or just over 1,300 inhabitants. Meanwhile, the population of Klaipėda District grew by 33.2% or almost 16,800 inhabitants over the same period. This highlights that the development of the Klaipėda region can be attributed to the population growth in the districts surrounding the city rather than the population growth in the city. The actual figures for construction volumes also confirm that over the last decade, 2.6 times more residential real estate (houses and apartments) was built in the Klaipėda region than in the city itself.

2024 can be characterised by much more modest construction volumes

When considering the volume of apartment construction in 2024 in the two largest cities in the country (Vilnius and Kaunas), the observable trend is opposite to that of 2023. Given the number of apartments currently under construction, Ober-Haus estimates that in 2024, a total of around 2,900 apartments will be built for sale in Vilnius, or 41% less than in 2023. A similar slowdown in construction volumes is expected in Kaunas, where around 850 apartments are expected to be built in 2024 (43% less than in 2023).

Reginis observes that the last time such low construction volumes were recorded in Vilnius was in 2014, while in Kaunas, it was during 2019–2020. “It is obvious that the low apartment sales volumes in the primary market in the last two years, and the very rapid increase in interest rates, have forced a number of developers to abandon their development plans or reduce the pace of their developments,” the expert said.

At the same time, in Klaipėda, the volume of apartment construction in 2024 will remain at a similar level to that during 2022–2023. According to Ober-Haus, about 420 apartments will be built in Klaipėda – slightly more than in 2023. Unlike Vilnius or Kaunas, Klaipėda has not seen a significant breakthrough in apartment construction since 2009, and there is no slowdown as such, since construction volumes remain at a relatively low level.

Overall, looking countrywide, there is a clear trend towards significantly decreased volumes of residential property construction. According to the State Data Agency, the number of apartments where construction was started in 2023 was 42% less and the number of houses reduced by 26% in comparison to 2022.

Inevitably, such a significant slowdown in housing development will have negative consequences for the overall market. For example, the construction segment in this sector of real estate will have significantly fewer orders than in previous years, and potential homebuyers will have fewer choices.

“If we see a stronger recovery of the housing market in 2024, but developers fail to respond by offering more housing, then the market could experience a greater shortage at some point. This would cause housing prices to increase again more rapidly. In addition, there is the recently widely discussed potential demand for accommodation in Vilnius and Kaunas to house the German brigade and their families due to arrive in Lithuania. Therefore, it is now crucial that businesses prepare for a faster market recovery scenario to prevent the market from becoming out of balance once again,” Reginis concluded.

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