The housing rental market of 2023 - steady climb upwards even with increasing competition

"Youston" Director Rūta Galinaitienė

The year 2023 was considerably more stable compared to several previous ones when both the pandemic and the onset of the unprovoked Russian war in Ukraine brought uncertainty to all markets. This is also reflected in the housing rental market - price growth in Vilnius remained stable throughout the year, while in Kaunas, despite experiencing some "dips", the curve also clearly trended upwards.

The stable growth in Vilnius - regardless of discussions

Although considerably more stable, the year 2023 had its challenges. For half of the year, there were active and even controversial discussions about the real estate tax, which had the potential to disrupt the market. Additionally, starting from 2024, it will only be possible to purchase a property in a fully completed building. All of this added pressure to the real estate market, although the discussions and requirements were aimed at property purchases, the new regulations in the housing purchase market translated into increased demand in the rental market. However, it should be emphasized that the Vilnius housing market did not feel any significant "pressure," as rental price growth remained steady throughout the year. At the beginning of the year, the average rental price stood at 655 euros, and by the end of the year, it had increased to almost 704 euros, which is nearly 8%.

It is interesting that a significant price jump did not occur, despite the favorable conditions created by external pressure and the decreasing supply of rental housing throughout the year. If we started the year with 4878 rental property listings, we ended up with only 3186. Practically throughout the year, we witnessed a decrease in supply, except for the month of August, when we recorded a sudden and significant 15% growth compared to July. However, this growth in just one month was likely temporary and probably due to two factors: seasonality and the opening of new co-living projects, which offered a considerable amount of housing.

Throughout the year, the size of the rental properties remained unchanged, with two-bedroom apartments dominating the supply (making up less than 50% of the total supply only in July), ranging from 49 to 51 square meters. These indicators have essentially remained the same for several years, with a slight decrease in apartment size (about 2%).

The dynamics in Kaunas - prices grew slower and less confidently

Speaking about the rental market in Kaunas in 2023 - we observe a less confident growth compared to Vilnius. If in January the average rental price was 500 euros, it dropped to 493 euros in February, and for the next few months, it increased insignificantly, reaching the 500 euro mark in April. Then there was a significant growth, and by July, it reached 526 euros. However, after this month, there was a notable decline, which can be attributed to the seasonal increase in rental supply. However, in October, with the significant decrease in supply (from 1760 property listings in August to only 1223 in October), rental prices started to rise rapidly. By the end of the year, with the rental supply almost halved (see chart No. 4) and prices rising by 5.9%, it seems like a good result considering the fluctuations throughout the year. However, it doesn't fully reflect the significant decrease in supply. Therefore, considering the low rental supply in Kaunas, we can expect further price corrections in the first months of the year.

In Kaunas, two-bedroom apartments dominate, constituting nearly 60% of the total housing rental supply, but the average size remains similar to Vilnius - 49-51 square meters. From the provided data, we can see that seasonality and supply had a huge impact on the Kaunas rental market. While rental prices in Vilnius steadily increased throughout the year, in Kaunas, they fluctuated according to the supply, which in turn fluctuated with the seasons. The Kaunas market reacts more actively to competition, whereas Vilnius is considerably less responsive to it.

The co-living supply will increase consumer expectations

In the second half of 2023, there was a significant increase in the supply of co-living housing in Vilnius. In May, 269 units were introduced to the rental market, followed by the opening of a new market player in September. Additionally, towards the end of the year, the market began to fill with pre-lease offers from another co-living project. Overall, the growth in this segment during the latter half of the year amounted to about 770 units, which constituted approximately 17% of the average supply for the previous year. Such significant growth in this segment indicates its increasing popularity and could significantly alter the rental market landscape, at least in Vilnius - reducing the shadow economy and increasing consumer demand for rental properties.