After almost three years of house price falls, the housing market in Lithuania is finally recovering.
The apartment price index for five largest cities rose slightly by 0.1% in October 2011 on the same month last year, according to Ober Haus. However, when adjusted for inflation, house prices are still down by 4.4% over the same period.
In Vilnius, the capital city, property prices rose by 3% to €1,208 per sq. m., according to the preliminary figures from Lithuania’s registry office. On a quarterly basis, property prices fell by 0.8% in Q3 2011, after a 2.2% drop in the previous quarter. House prices in Vilnius are still down by 39.1% from the peak in December 2007.
On the other hand, property prices in all other cities (excluding Vilnius) rose by 6% y-o-y to Q3 2011. House prices dropped 2.9% q-o-q to Q3 2011.
After registering double-digit house price increases from 2003 to 2007, house prices started to decline in 2008 due to the global crisis.
The average interest rate paid by households for a housing loan denominated in Lithuania litas (LTL) currently stands at 3.6%, down from 6.2% in March 2010. In mid-2011, the average interest rate on new mortgage loans was about 3.4%.
Lithuania’s property market is expected to continue recovering, fuelled by strong economic growth (with projected GDP growth rate of 6.2% in 2011).
The apartment price index for five largest cities rose slightly by 0.1% in October 2011 on the same month last year, according to Ober Haus. However, when adjusted for inflation, house prices are still down by 4.4% over the same period.
In Vilnius, the capital city, property prices rose by 3% to €1,208 per sq. m., according to the preliminary figures from Lithuania’s registry office. On a quarterly basis, property prices fell by 0.8% in Q3 2011, after a 2.2% drop in the previous quarter. House prices in Vilnius are still down by 39.1% from the peak in December 2007.
On the other hand, property prices in all other cities (excluding Vilnius) rose by 6% y-o-y to Q3 2011. House prices dropped 2.9% q-o-q to Q3 2011.
After registering double-digit house price increases from 2003 to 2007, house prices started to decline in 2008 due to the global crisis.
- In 2008, house prices dropped by 15.2% (-21.8% inflation-adjusted)
- In 2009, house prices plunged by 26.8% (-27.7% inflation-adjusted)
- In 2010, house prices fell by 3% (-6.4% inflation-adjusted)
The average interest rate paid by households for a housing loan denominated in Lithuania litas (LTL) currently stands at 3.6%, down from 6.2% in March 2010. In mid-2011, the average interest rate on new mortgage loans was about 3.4%.Lithuania’s property market is expected to continue recovering, fuelled by strong economic growth (with projected GDP growth rate of 6.2% in 2011).
Analysis of Lithuania Residential Property Market »
RENTAL YIELDS
Last Updated: Aug 31, 2011
Prices have fallen very significantly in Vilnius since two years ago, with most of the drop occurring in 2009. Typical prices for apartments in central Vilnius have fone from 3,500 Euros per square metre in late 2008, to around 1,900 Euros today.
Small apartment prices have lower per square metre prices, on average (1,700 Euros), while larger apartment prices are on average higher (2,400 Euros). Suburban properties are significantly less expensive (with a typical range from 1,300 Euros to 1,800 Euros)
Gross rental yields on apartments in central Vilnius continue to be moderate, with yields of around 4%, except on the very smallest apartments (35 square metres) where yields approach 5%.
Yields are a little higher in Vilnius’ suburbs, at around 5%.
Eventually, rents will presumably pick up, and yields should recover. But this will only happen over time.
Small apartment prices have lower per square metre prices, on average (1,700 Euros), while larger apartment prices are on average higher (2,400 Euros). Suburban properties are significantly less expensive (with a typical range from 1,300 Euros to 1,800 Euros)
Gross rental yields on apartments in central Vilnius continue to be moderate, with yields of around 4%, except on the very smallest apartments (35 square metres) where yields approach 5%.
Yields are a little higher in Vilnius’ suburbs, at around 5%.
Eventually, rents will presumably pick up, and yields should recover. But this will only happen over time.
TAXES AND COSTS
Last Updated: Mar 13, 2012
Rental Income: Rental income tax is moderate at 15% of the gross income.
Capital Gains: Capital gains are treated as ordinary taxable income.
Inheritance: The inheritance tax rate is 5% for property up to LTL500,000 (€144,810). Otherwise, the tax rate is 10%.
Residents: Residents are taxed on their worldwide income. Residents are entitled to basic non-taxable allowance at €1,112 a year as well as other deductions.
Capital Gains: Capital gains are treated as ordinary taxable income.
Inheritance: The inheritance tax rate is 5% for property up to LTL500,000 (€144,810). Otherwise, the tax rate is 10%.
Residents: Residents are taxed on their worldwide income. Residents are entitled to basic non-taxable allowance at €1,112 a year as well as other deductions.
BUYING GUIDE
Last Updated: Dec 03, 2007
Roundtrip transaction costs, i.e., the cost of buying and selling property, are generally low at 2.3 - 5%. However, buildings sold within 24 months of completion are subject to 18% VAT. The seller typically pays the real estate agent’s fee, which ranges from 1.5% to 3%, plus 18% VAT.
LANDLORD AND TENANT
Last Updated: Jul 05, 2006
Rent: Rents can be freely negotiated between landlord and tenant. If the tenant cannot agree the renewal terms with the landlord, he may go to court for arbitration of the amount of rent.
Tenant Security: Upon expiration of a contract the tenant has the ‘priority right’ to renew for a new term, which will be for twelve months.
Tenant Security: Upon expiration of a contract the tenant has the ‘priority right’ to renew for a new term, which will be for twelve months.
ECONOMIC GROWTH
Last Updated: Oct 25, 2011
Strong GDP growth, low unemployment for 2011
Lithuania is the most populous and largest of the Baltic States, with a population of 3.4 million. Following independence from the USSR in 1990, Lithuania emerged as a successful transition state, becoming one of Europe’s fastest growing economies.Lithuania’s economy expanded by 6.3% in the second quarter of 2011, fuelled by increased consumption and high foreign direct investments (FDIs).
In 2009, economy shrank by almost 15%, the worst recession in the EU, largely due to the bursting of the property bubble, higher tax rates, the end of cheap money and a huge contraction in exports. After growth of more than 7% annually from 2004 to 2006, GDP growth had reached 8.8% in 2007. In 2008, the economy began to slow, due to contagion from the global financial meltdown.
In 2010, the economy finally emerged from recession with GDP growth of 1.3%. Now it is continuing to pick up momentum. In 2011 Lithuania is expected to post GDP growth of 6.2%, according to the Bank of Lithuania.
From January-July 2011, exports rose 38.3% as compared with the corresponding period in 2010. Foreign direct investment (FDI) increased more than 50% in the second quarter of 2011, compared to the same quarter last year. Specifically, 30 FDI projects were launched early this year, expected to generate LTL5.85 billion (€1.7 billion), according to the Ministry of the Economy of the Republic of Lithuania. During the year to end-H1 2011, the accumulated FDI in Lithuania increased by 11.7% to LTL37 billion (€10.7 billion).
In September 2011, the annual inflation rate stood at 4.5%, up from 1.2% in 2010, 4.2% in 2009, and 11.1% in 2008.
Unemployment was 15.6% in Q2 2011, a sharp decline from 17.2% the previous quarter. Due to the global crisis, unemployment had risen to 17.8% in 2010, up from an average of 6% from 2005 to 2008.
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