Residential construction development in Lithuania

Laura Tupėnaitė
Dr., Associate Professor
Department of Construction Management and Real Estate, Vilnius Gediminas Technical University
Lithuania

laura.tupenaite@vilniustech.lt

Lithuania’s residential construction market took a long way to become as modern as it is now. In 1990 Lithuania gained its independence from the Soviet Union. At this time the residential market was not developed, and housing stock consisted mainly of urban Soviet housing estates: high-rise prefabricated apartment buildings (mostly 5–12 storeys), working-class dormitories and rural settlements. Privatization, restitution and land reforms have been carried out, and residents acquired their rights to ownership of the housing. By the end of 1998, Lithuania’s housing stock consisted of 1,306,061 housing units, on average 353 units per 1000 inhabitants. Most of these dwellings were situated in prefabricated high-rise buildings with low energy efficiency, neglected maintenance and repair and poor technical infrastructure. Moreover, serious housing shortages were observed.

In 2004 Lithuania became a full-fledged member of the European Union. Lithuania gained more than 10 billion euros in financial aid, which has boosted economic growth and created jobs. Economic development positively influenced the construction sector and enforced development of modern residential construction projects. In 2005–2008 construction sector was one of the most developing industry branches in Lithuania. The main reasons for this rapid development were growth of national industry, good credit terms, possibilities given by EU Structural Funds, higher demand for residential buildings, increasing supply of new building materials and technologies.

The situation changed dramatically in 2009, when construction sector decline reached more than 60% due to global financial crisis. Over this period, financial institutions stopped credit lines for almost all real estate development projects. During the next two years, real estate development was financed mainly by the state and businesses’ own financial resources. The construction business had skipped their investment plans in residential real estate development projects due to the decreasing demand of their products and services.

From 2011 situation has changed to positive. Lithuania slightly recovered from the crisis. In ten years (2011–2021), 107,250 new dwellings (in individual and multifamily houses) were built. New developments were encouraged by the growth of the economy, low interest rates followed by increasing demand for housing and development of rental market, especially in the capital Vilnius.

The COVID-19 pandemic also had impacts on residential market developments. Within the quarantine period, interest in real estate not only remained but was also higher than before, and demand for semi-detached, individual houses, homesteads and apartments in the seaside has increased. Being close to nature became a new value for households.

There was a growing trend to incorporate sustainability and energy saving strategies into individual and multifamily residential construction projects. Directive 2010/31/EU and the national calculation of cost-optimal levels of minimum energy performance requirements have been transposed into Lithuanian laws so that Lithuania is on track toward implementing relevant requirements. The minimum energy performance class of new buildings and building units is being progressively tightened towards NZEB based on the energy efficiency classes, i.e., from 2021 the energy performance class must be at least A++.

Residential real estate developers and architects are searching for sustainable construction solutions, which are necessary due to climate change, saving on expensive energy costs and reducing the carbon footprint. Residents’ interest in ecology and appreciation of sustainable architecture and construction is increasing. People are looking for quality housing and a healthy living environment and are willing to pay more for an apartment in a sustainable building. European Green Deal is expected to encourage building with local natural building materials, for instance, timber. Discussions about the construction of high-rise residential timber buildings have already started.

It can be concluded that the residential construction market developed very fast in recent years and residents of Lithuania now have a wide choice of modern housing. However, current geopolitical situation, war in Ukraine, increased costs of living, energy and construction materials, and interest rates will negatively impact housing affordability. According to the Centre of Registers, real estate transactions in Lithuania have slumped 18% on the year so far, and the gloom can extend well into 2023. On the other hand, if activities in the new residential building market will slow down, housing stock can be improved by renovating existing buildings.

Acknowledgement

Part of the research was supported by the European Commission Erasmus+ programme, project “Circular Economy in Wooden Construction” (Wood in Circle), No. 2020-1-LT01-KA203-077939.

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