As the housing market cools down, developers and investors are changing their behavior
The inventory of unsold apartments in Vilnius has recently returned to the pre-pandemic level of 5,000 units, prompting developers to slow down the pace of new project development. Meanwhile, the real estate market's unpredictability is unsettling investors, yet there remains a significant amount of capital in the market, and attractive properties with substantial discounts are selling within just a few days, stated Martynas Stankevicius, CEO of the real estate crowdfunding platform Röntgen during a meeting with investors.
According to real estate company "Inreal," about 200 new apartments have been steadily sold each month in Vilnius for the past year, a number now considered normal by the market. A notable increase in sales (312 apartments) was recorded in March, but the market does not yet agree on the sustainability of this increase.
In comparison, from the beginning of 2019 to the spring of 2022, excluding the first months of quarantine, the market standard in Vilnius was around 400 dwellings per month, but during this period the Euribor interest rate was 0%.
"Although the market is still significantly slowing down, discounts on quality housing are not very common and the overall price level is not generally decreasing. It has become easier to negotiate a lower price only at the pre-sale stage - before or after the start of construction. On the other hand, we can see that properties offered at a significant discount are sold in just a few days," Stankevicius was quoted as saying in the report.
The inventory of unsold apartments in Vilnius has recently returned to the pre-pandemic level of 5,000 units, prompting developers to slow down the pace of new project development. Meanwhile, the real estate market's unpredictability is unsettling investors, yet there remains a significant amount of capital in the market, and attractive properties with substantial discounts are selling within just a few days, stated Martynas Stankevicius, CEO of the real estate crowdfunding platform Röntgen during a meeting with investors.
Data from Inreal and Röntgen companies
According to him, real estate development companies are adjusting their business plans: new projects are no longer started until the existing apartments are sold, and efforts are focused on preparing land in anticipation of a future recovery. This behavior is driven by the growing inventory of unsold homes: having reached about 5,000 units before the lockdown, which then halved during the pandemic buying frenzy, it has recently approached the 5,000 mark again. This number may rise slightly in the near future, so developers who have not sold their existing apartments are in no rush to start new projects.
"To avoid oversupply and to balance the market, developers are slowing down the launch of new projects. There are few projects left on the market that have just been launched, and now developers are just completing them and not starting new construction without reaching a sales level acceptable to them, so they are focusing more on the acquisition of new plots and development planning," said M. Stankevicius.
Data from Inreal company
He believes that the market would be triggered by falling Euribor rates, which are expected in the second half of this year. At the same time, a moderate reduction in interest rates would be healthy for the market, as it would help to avoid a rush to clear the warehouse and a corresponding pressure on prices.
"As for real estate creditors, such as private investors, they are not reducing their lending pace. Although recent uncertainties in Lithuania have unsettled both retail and professional investors, the amount of money remains substantial, and investment in Lithuania continues, albeit more cautiously: with greater diversification, smaller amounts allocated to individual projects, and a stronger focus on the most liquid assets, primarily completed homes," said M. Stankevicius.
As the housing market cools down, developers and investors are changing their behavior
The inventory of unsold apartments in Vilnius has recently returned to the pre-pandemic level of 5,000 units, prompting developers to slow down the pace of new project development. Meanwhile, the real estate market's unpredictability is unsettling investors, yet there remains a significant amount of capital in the market, and attractive properties with substantial discounts are selling within just a few days, stated Martynas Stankevicius, CEO of the real estate crowdfunding platform Röntgen during a meeting with investors.
According to real estate company "Inreal," about 200 new apartments have been steadily sold each month in Vilnius for the past year, a number now considered normal by the market. A notable increase in sales (312 apartments) was recorded in March, but the market does not yet agree on the sustainability of this increase.
In comparison, from the beginning of 2019 to the spring of 2022, excluding the first months of quarantine, the market standard in Vilnius was around 400 dwellings per month, but during this period the Euribor interest rate was 0%.
"Although the market is still significantly slowing down, discounts on quality housing are not very common and the overall price level is not generally decreasing. It has become easier to negotiate a lower price only at the pre-sale stage - before or after the start of construction. On the other hand, we can see that properties offered at a significant discount are sold in just a few days," Stankevicius was quoted as saying in the report.
The inventory of unsold apartments in Vilnius has recently returned to the pre-pandemic level of 5,000 units, prompting developers to slow down the pace of new project development. Meanwhile, the real estate market's unpredictability is unsettling investors, yet there remains a significant amount of capital in the market, and attractive properties with substantial discounts are selling within just a few days, stated Martynas Stankevicius, CEO of the real estate crowdfunding platform Röntgen during a meeting with investors.
Data from Inreal and Röntgen companies
According to him, real estate development companies are adjusting their business plans: new projects are no longer started until the existing apartments are sold, and efforts are focused on preparing land in anticipation of a future recovery. This behavior is driven by the growing inventory of unsold homes: having reached about 5,000 units before the lockdown, which then halved during the pandemic buying frenzy, it has recently approached the 5,000 mark again. This number may rise slightly in the near future, so developers who have not sold their existing apartments are in no rush to start new projects.
"To avoid oversupply and to balance the market, developers are slowing down the launch of new projects. There are few projects left on the market that have just been launched, and now developers are just completing them and not starting new construction without reaching a sales level acceptable to them, so they are focusing more on the acquisition of new plots and development planning," said M. Stankevicius.
Data from Inreal company
He believes that the market would be triggered by falling Euribor rates, which are expected in the second half of this year. At the same time, a moderate reduction in interest rates would be healthy for the market, as it would help to avoid a rush to clear the warehouse and a corresponding pressure on prices.
"As for real estate creditors, such as private investors, they are not reducing their lending pace. Although recent uncertainties in Lithuania have unsettled both retail and professional investors, the amount of money remains substantial, and investment in Lithuania continues, albeit more cautiously: with greater diversification, smaller amounts allocated to individual projects, and a stronger focus on the most liquid assets, primarily completed homes," said M. Stankevicius.
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"Trečia diena" UAB, which operates the Röntgen platform, is a licensed crowdfunding platform. The platform is governed by the EU Crowdfunding Regulation and is supervised by the Bank of Lithuania in accordance with the law.