Lithuania’s housing market remains healthy

Lalaine C. Delmendo | May 18, 2021

Lithuania’s housing market, as well as the overall economy, remains robust, despite the COVID-19 pandemic. The five major cities’ apartment price index (covering Vilnius, Kaunas, Klaipėda, Šiauliai and Panevėžys) rose by 5.3% during the year to February 2021, according to OberHaus Real Estate Advisors. When adjusted for inflation, apartment prices increased 4.7% y-o-y in February 2021.

All Lithuanian major cities saw strong to modest house price rises during the year to February 2021:

  • In Vilnius average apartment prices rose by 5.7% y-o-y in February 2021, to €1,728 per square metre (sq. m.). When adjusted for inflation, prices in the capital city increased 5.1% over the same period.
  • In Kaunas, apartment prices rose by 3.8%, to an average of €1,209 per sq. m. (increased 3.2% after inflation)
  • In Klaipėda, apartment prices rose by 4.5%, to an average of €1,192 per sq. m. (increased 3.9% after inflation)
  • In Šiauliai, apartment prices rose strongly by 7.8%, to an average of €809 per sq. m. (increased 7.2% after inflation)
  • In Panevėžys, existing flats soared by 7.9%, to an average of €794 per sq. m. (increased 7.2% after inflation)

The residential construction sector is resilient. During 2020, dwellings permits were more or less steady at 15,155 units while dwelling completions rose by 10.6% to 13,903 units, according to Statistics Lithuania.

Lithuania house prices

Almost all Lithuanian dwelling stock is in private ownership (98%).

Demand slowed last year due to pandemic-related lockdowns and travel restrictions. In 2020, residential property transactions in Lithuania fell by 8.5% y-o-y to 32,966 units, according to figures from the State Enterprise Centre of Registers. In Vilnius, transactions also dropped 14% y-o-y to 4,773 units last year.

There are virtually no restrictions in foreign ownership of land in Lithuania, except for agricultural lands.

Lithuania house price index major cities

During 2020, Lithuania’s economy contracted only slightly by 0.9% from a year earlier – the least among the Baltic countries, and probably the lowest in the EU. The economy is expected to expand by a modest 2.1% this year and by another 3.1% in 2022, according to the European Commission.

Lithuania joined the eurozone in January 1, 2015.

That crazy housing boom and bust

Before the global crisis, Lithuania saw enormous house price increases. The average price of old apartments in Central Vilnius rose 275% between 2002 and 2006. This included a house price surge of 28% in 2003, 29% in 2004, 45% in 2005 and 56% in 2006.

Residential property prices in the capital started to decline in 2008, after the global credit crunch. House prices plunged by 15.2% (-21.9% inflation-adjusted) in 2008 and by another 26.8% (-27.8% inflation-adjusted) in 2009. Then the housing market showed some signs of improvement, with prices falling by just an average of 1.8% (4.9% inflation-adjusted) annually from 2010 to 2012.

In 2013, the property market finally recovered and house prices have been rising modestly since then. From 2014 to 2020, house prices increased by 29.6% (16.9% inflation-adjusted).

During 2020, house prices rose by 4.1% (3.8% inflation-adjusted) despite the pandemic.


Year Nominal Inflation-adjusted
2008 -15.23 -21.85
2009 -26.84 -27.77
2010 -2.98 -6.55
2011 -0.64 -3.91
2012 -1.65 -4.36
2013 1.12 0.76
2014 3.34 3.61
2015 2.29 2.38
2016 5.50 3.72
2017 3.57 -0.33
2018 3.94 2.01
2019 7.18 4.34
2020 4.06 3.81
Sources: Ober Haus, Global Property Guide

Property demand slows

During 2020, there were 32,966 residential property transactions in Lithuania, down by 8.5% a year earlier and by 4.1% two years ago, amidst the pandemic, according to figures from the State Enterprise Centre of Registers.

Lithuania transactions

In major cities:

  • In Vilnius, 4,773 new units were sold last year, down by 14% a year earlier but still up by 8% compared to the average of 2017-19, according to Inreal’s Lithuanian Economic and Real Estate Market Report 2020 – 2021.
  • In Kaunas, 730 new units were sold, 13% less than in 2019 but still 22% more than the average in the past three years.
  • In Klaipėda, 354 new housing units were sold in 2020, 9% lower than the previous year but is at par with the 2017-19 average.
  • In Palanga and Šventoji, 416 new units were sold, up 73% from a year earlier and by 57% as compared to 2017-19 average.
  • In Neringa, about 106 new housing units were sold in 2020, 19% higher than in 2019 and twice as much as the 2017-19 average.

Residential construction remains robust

During the 1980s, when the country was still socialist, more than 20,000 dwelling units were built annually.

Completions dropped to less than 5,000 annually between 1998 and 2003, leaving a huge, pent-up demand.

As the economy gathered steam, housing construction accelerated:

  • In 2004-2006 dwellings completions rose to an average of 6,700 yearly
  • In 2007, there were 9,286 completed dwellings
  • In 2008 dwelling completions rose to 11,286, the highest since 1992

Then suddenly things stalled. Completions averaged just 5,500 units annually from 2010 to 2014.

Lithuania dwellings constructions

Construction activity started to recover in 2015. Dwelling completions averaged 12,100 units annually from 2015 to 2020.

During 2020:

  • The number of dwellings for which building permits were granted was almost unchanged last year at 15,155 units, based on figures from Statistics Lithuania.
  • Dwelling completions rose by 10.6% y-o-y to 13,903 units.

Currently, there are a total of 888,313 apartment units in Lithuania, according to the State Enterprise Centre of Registers.

Low interest rates

The average interest rate for new housing loans was 2.19% in March 2021, slightly down from 2.31% a year earlier and 2.37% two years ago, according to the Bank of Lithuania.

Lithuania interest rates

For new loans:

  • The average interest rate for new housing loans with initial rate fixation (IRF) of up to 1 year stood at 2.1% in March 2021, down from 2.24% a year earlier and 2.27% two years ago.
  • The average rate for new housing loans with IRF of more than 1 year was 5.68%, up from 4.72% in March 2020 but down from 7.84% two years ago.

For outstanding loans, the average interest rate was 1.89% in February 2021, slightly up from 1.83% in the previous year and 1.72% two years ago.

  • Up to 1 year maturity: 2.28%, down from 3.15% in February 2020 but up from 0.94% in February 2019
  • 1-5 years maturity: 4.85%, up from 4.24% a year earlier and 3.48% two years ago
  • Over 5 years maturity: 1.88%, slightly up from 1.83% a year earlier and 1.71% two years ago

More than 99% of all housing loans have maturity of over 5 years. All new loans are now in euros. Lithuania joined the Euro on January 1, 2015, the bloc’s 19th member. The Litas, which had been pegged to the Euro for a decade, went out of circulation.

Mortgage market continues to recover

The mortgage market reached 18.7% of GDP in 2020, almost back to the 22.4% of GDP it occupied before the 2009 crisis, and up from a mere 0.4% of GDP in 2000.

About 80% of all dwelling purchases are now made with the aid of mortgages, and typically 95% of all property value is granted in loans.

Lithuania housing loans

In March 2021, the total housing loans outstanding rose by 8.6% to €9.37 billion from a year earlier, following an annual average growth of 8.2% from 2016 to 2020, according to Bank Lithuania.

Rental yields remain good; rents back to pre-pandemic levels;

Gross rental yields - the average return on investment - on apartments both in the city centre and in the suburbs are moderately good, at around 5.5%. In Vilnius, rental yields have been almost stable in the past three years, according to Global Property Guide research.

After falling by about 2% to 3%, on average, in H1 2020, apartment rents in Vilnius bounced back in the second half to their pre-pandemic levels, according to OberHaus.

“The optimistic outlook in the entire real estate market and the increased activity of the residential property rental segment essentially meant that rents for apartments returned to early 2020 levels,” said OberHaus.

By end-2020:

  • A typical two-bedroom, existing apartment in Vilnius residential districts rents for €270 to €330 per month while a same size new apartment rents for €350 to €470 per month, according to OberHaus.
  • An equipped two-bedroom apartment, either old or new, located in the city centre is offered for €320 to €660 monthly rent. For three-bedroom apartments, monthly rents range from €420 to €950. Rents for bigger and well-equipped apartments in the Old Town range from €1,000 to €1,400.
  • Fully-equipped houses, measuring between 100 to 200 sq. m., situated on the outskirts of Vilnius, are rented out for €650 to €1,400 per month.
  • In the city centre and the prestigious districts of Valakampiai, Antakalnis, Zverynas, monthly rents are much higher and can vary from €1,000 to €3,000. Rents for bigger houses in the best locations can go as high as €4,000 to €6,000 monthly.

OberHaus expects around 2% to 3% rise in Vilnius residential rents in 2021 – much less than the increase in sales prices.

Mild economic recession

During 2020, Lithuania’s economy contracted only slightly by 0.9% from a year earlier – the least among the Baltic countries, and probably the lowest in the EU.

“Lithuania’s milder recession reflects a relatively well-controlled pandemic, and low direct exposure to tourism (less than 2.0% of GDP, World Trade Tourism),” said Fitch Ratings. “Resilience in the export sector, particularly demand for low-valued goods and transportation services, also helped cushion the economic fallout.”

Lithuania GDP growth graph

The economy is expected to expand by a modest 2.1% this year and by another 3.1% in 2022, according to the European Commission.

The financial crisis of 2008-9 brought to an end years of amazing average growth of 8.2% from 2001 to 2007. The economy slowed in 2008, and shrank by almost 15% in 2009.

In 2010 the economy finally emerged from recession, with GDP growth of 1.6%. Then in 2011 the Lithuanian economy began to expand strongly, with real GDP growth of 6.1%, the second fastest pace in the EU. The economy expanded by an average of 3.6% annually from 2012 to 2014. However in 2015, economic growth slowed to 2%, the slowest growth since 2010, due to sluggish investment and decline in exports to Russia, the country’s largest single trading partner.

The Lithuanian economy strengthened again in recent years, growing by an annual average of 4.2% in 2017-19, before the coronavirus.

Lithuania unemployment

Unemployment was 9% in Q4 2020, down from 9.3% in the previous quarter but still up from 6.4% in the same period last year, according to Statistics Lithuania.

Annual inflation increased to 1.6% in March 2021, up from 0.6% in the previous month and the highest level since March 2020. Inflation is expected to accelerate to 1.7% this year, after slowing to just 1.1% last year amidst the pandemic, according to the European Commission.

Lithuania’s public finances worsens

In 2020, Lithuania recorded a budget deficit of 7.4% of GDP, in contrast to a surplus of 0.5% of GDP in 2019, mainly driven by a surge in government spending to fight the pandemic, according to Eurostat. This breaks the country’s four consecutive years of surpluses and its biggest shortfall since 2011.

The deficit is projected to increase further to about 8.1% of GDP this year, as more than €500 million in additional funding will be allocated for pandemic response. Under the government’s Stability Program approved in late April 2021, a total of €1.6 billion is allocated this year for coronavirus-related measures.

Government debt was equivalent to around 47.3% of GDP in 2020, sharply up from 35.9% of GDP in 2019 and 33.7% in 2018. Debt is expected to increase further to about 52.9% of GDP this year.

Lithuania budget balance

Yet the increased debt level is not a cause for alarm. “Despite a higher debt level, debt sustainability remains underpinned by falling interest costs, a decline in foreign-currency exposure, and highly favourable financing conditions supported by the ECB’s asset purchasing programmes,” said Fitch Ratings.

“A pre-Covid-19 track record of fiscal surpluses, credible policy framework and high governance indicators, supports our expectation that Lithuania will return to fiscal consolidation policies once the impact of the pandemic subsides,” Fitch Ratings added.

The country’s new centre-right coalition government led by Prime Minister Ingrida Šimonytė is expected to continue an agenda consistent with pro-EU and NATO policies.


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