Lithuania

Lithuania's Residential Real Estate Market Analysis 2024

Lalaine C. Delmendo

Lithuania's house price growth is noticeably decelerating, amidst the continued decline in property demand due to high interest rates, as well as declining residential construction activity.

Table of Contents

Housing Market Snapshot

The five major cities' apartment price index (covering Vilnius, Kaunas, Klaipėda, Šiauliai, and Panevėžys) rose by a modest 3.21% in July 2024 from a year earlier, according to Ober Haus Real Estate Advisors. It was a deceleration from y-o-y price growth of 6.72% in July 2023, 22.3% in July 2022, and 15.31% in July 2021.

Lithuania's house price annual change

When adjusted for inflation, apartment prices were up by 2.29% y-o-y in July 2024.

All Lithuanian major cities continued to register nominal house price rises during the year to July 2024, albeit at a slower pace.

  • In Vilnius, average apartment prices rose by 2.2% y-o-y in July 2024, to €2,614 per square metre (sqm). When adjusted for inflation, prices in the capital city increased by a meager 1.3% over the same period.
  • In Kaunas, apartment prices were up by 3.5% to an average of €1,790 per sqm in July 2024 from a year earlier, and by 2.6% when adjusted for inflation.
  • Klaipėda saw the biggest increase in apartment prices of 6.3% y-o-y in July 2024, to an average of €1,704 per sqm. In real terms, prices were up by 5.4% over the same period.
  • In Šiauliai, apartment prices rose by a modest 3.4% to an average of €1,131 per sqm in July 2024 from a year earlier, and by 2.5% when adjusted for inflation.
  • In Panevėžys, prices of existing flats were up by 4.1% y-o-y, to an average of €1,109 per sqm in July 2024. Prices were up by 3.2% in real terms.

"Despite the continued sluggishness in the housing market, sellers are still managing to sell their homes at slightly higher prices than before. They just have to accept a noticeably longer selling period as the market continues to suffer from a lack of firmly committed buyers," said Ober Haus. "And looking at the situation in the country's housing market over the last two years, the patience of home sellers has paid off and the majority of buyers have not been able to get lower prices."

Lithuania House Price Indices in Major Cities graph

Demand continues to fall. Nationwide, the total number of housing transactions fell to 30,557 in 2023 - the second-lowest level recorded in the past decade. Transactions dropped by 14% in 2022 but increased by 21% in 2021.

The weakness of the housing market continued this year, with only 4,850 residential building transactions in the first half of 2024 - down by 13.6% as compared to the previous half-year and 5.7% less than the same period last year. Likewise, there were a total of 31,142 land transactions in H1 2024, lower by 16.2% as compared to H2 2023 and by 14.2% from H1 2023.

Foreign demand is also weak, despite virtually no restrictions on foreign ownership of land in Lithuania, except for agricultural lands.

As a result, residential construction activity remains weak. In the first half of 2024, dwelling permits fell by 10% y-o-y to 5,308 units while completions declined by 4.1% to 7,233 units, based on Statistics Lithuania's figures.

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

During 2023, Lithuania's economy contracted by 0.3% from a year earlier, in stark contrast to annual expansions of 2.4% in 2022 and 6.3% in 2021, primarily due to weak private consumption and falling real exports in goods, amidst high inflation, trade disruptions and dampened confidence in the market.

Economic growth is projected to pick up to 2% for the whole year of 2024 and to strengthen further to 2.9% in 2025, based on European Commission estimates. The International Monetary Fund (IMF) released an even more optimistic outlook for Lithuania, projecting a real GDP growth rate of 2.4% this year.

Lithuania joined the eurozone on January 1, 2015.

Demand Highlights

Demand continues to fall

Nationwide, the total number of housing transactions fell to 30,557 in 2023 - the second-lowest level recorded in the past decade. Transactions dropped by 14% in 2022 but increased by 21% in 2021.

"The decrease in the number of transactions isn't only recorded in the overall market but it's also evident in the number of transactions of new construction residential premises. This decline was partly influenced by the results of 2022, during which buyers purchased fewer housing units in projects still under construction," said Inreal.

During 2023:

  • The number of residential buildings sold fell sharply by 19.7% y-o-y to 10,757. Of which, new construction buildings saw about one-third drop in sales at 2,109 while sales of old buildings declined by 15.2% y-o-y to 8,648.
  • In the land plot market, sales also fell by 14.1% from 85,517 transactions in 2022 to 73,422 transactions last year.

The weakness of the housing market continued this year, with only 4,850 residential building transactions in the first half of 2024 - down by 13.6% as compared to the previous half-year and 5.7% less than the same period last year.

Likewise, there were a total of 31,142 land transactions in H1 2024, lower by 16.2% as compared to H2 2023 and by 14.2% from H1 2023.

Yet there is a wide variation in residential property sales movements in the country's major cities in the first half of 2024:

  • In Vilnius, apartment sales and reservations increased by a huge 45.5% y-o-y to 1,328 units in H1 2024. Likewise, sales of houses and townhouses rose by 13.1% y-o-y to 121 units over the same period.
  • In Kaunas, apartment sales fell by 7.7% y-o-y to 240 transactions in H1 2024. In contrast, house and townhouse sales increased several times to 84 transactions in H1 2024 as compared to the exceptionally low activity of just 6 transactions seen in H1 2023.
  • In Klaipėda, activity in the apartment market declined to just half from 113 sales and reservations in H1 2023 to 62 in H1 2024. In contrast, house and townhouse transactions increased more than six times to 39 over the same period.
  • In Palanga, there were 167 apartment sales and reservations in H1 2024, almost 2.5 times more than a year earlier. On the other hand, activity in the local townhouse and house segment was particularly low over the same period.

Lithuania House Price Indices in Major Cities graph

Supply Highlights

Residential construction activity remains weak

Residential construction activity in Lithuania continues to fall.

For permits, the total number of dwellings authorized fell by a huge 25.32% to 11,805 units in 2023 from a year earlier, following a decline of 18% in 2022, according to figures from Statistics Lithuania.

  • For one and two-dwelling buildings, the number of dwellings for which building permits were granted plunged by 27% in 2023 to 7,527 units, following a decline of 30.9% in 2022.
  • For three and more dwelling buildings, permits also plummeted by 35.9% y-o-y to 4,278 units last year, after increasing by 18% in 2022.

Dwelling completions fell by 9.1% y-o-y to 15,432 units in 2023, after climbing by a huge 46.7% in the prior year.

  • For one and two-dwelling buildings, completions were down by 5.8% y-o-y to 9,465 units last year, after a strong growth of nearly 30% in 2022.
  • For three or more dwelling buildings, completions fell by 13.9% to 5,967 units in 2023 from a year earlier, after a surge of 82.5% in the prior year.

Then in the first half of 2024, dwelling permits fell by 10% y-o-y to 5,308 units while completions declined by 4.1% to 7,233 units, based on Statistics Lithuania's figures.

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 dwelling 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.

Construction activity started to recover in 2015. Dwelling completions averaged nearly 13,000 units annually from 2015 to 2023.

Lithuania House Price Indices in Major Cities graph

Rental Market

Rental yields are moderately good; rents continue to rise

The average gross rental yields in Lithuania stood at 6.44% in Q2 2024, slightly down from 6.77% in Q3 2023, according to a research conducted by the Global Property Guide. These are good yields. For the very smallest apartments, yields would be even higher, up to 8%.

In major cities:

  • In Vilnius, apartments earn rental yields from 3.82% to 8%, with a city average of 5.65%.
  • In Šiauliai, gross rental yields range from 6.63% to 7%, with a city average of 6.82%.
  • In Kaunas, apartments offer rental yields ranging from 5.25% to 7.2%, with a city average of 6.36%.
  • In Klaipeda, rental yields range from 6.53% to 7.33%, with a city average of 6.83%.

Figures from Ober Haus' 2024 Real Estate Market Report for Baltic States Capitals are more conservative, with the average residential yields at the Vilnius city center estimated at about 4.9% in 2023. Though it was slightly higher than 4.5% in 2022, 4.2% in 2021, and 4.4% in 2020.

Rents continue to increase, buoyed by increased demand from people and companies fleeing from Ukraine, Belarus, and Russia, as well as a reduced supply of rental apartments. During 2023, apartment rents in Vilnius rose by 10.2%, following increases of 26.7% in 2022 and 9.5% in 2021, according to Ober Haus.

"Overall, the rental market remained active due to the increased population and potential home buyers who were more cautious about purchasing. Renting a home became a more affordable housing alternative, sustaining the activity in this sector throughout 2023," said Ober Haus.

"And the number of offers for rental apartments in Vilnius decreased by 5-10% during 2023," noted the Ober Haus report.

By end-2023:

  • A typical two-bedroom, existing apartment in Vilnius residential districts rents for €380 to €540 per month, up from a monthly rent of €360 to €520 in 2022. A same-size new apartment rents for €580 to €720 per month, higher than the range of €500 to €680 in the previous year, based on figures from the Ober Haus.
  • An equipped two-bedroom apartment, either old or new, located in the city center and surrounding areas is offered for a monthly rent of €470 to €1,000, up from €450 to €950 in the prior year. For three-bedroom apartments, monthly rents ranged from €650 to €1,700, slightly up from €620 to €1,600 in 2022. Rents for bigger and well-equipped apartments in the Old Town can cost €2,000 to €3,000 per month, slightly higher than the prior year's €1,800 to €3,000 range.
  • Fully-equipped houses, with sizes measuring between 100 to 200 sq. m., situated on the outskirts of Vilnius, are rented out for €950 to €2,000 per month last year, from €900 to €2,000 per month in 2022.
  • In the city center and the prestigious districts of Valakampiai, Antakalnis, and Zverynas, monthly rents are much higher and can vary from €1,500 to €4,000 in 2023, nearly unchanged from a year earlier. Rents for bigger houses in the best locations can go as high as €5,000 to €6,000 monthly.

The residential rental market is projected to remain tight in the coming years, amidst continued strong demand both from locals and foreigners. Rents are projected to continue rising, albeit at a much slower pace, as the market gradually stabilizes.

"The outlook for the housing rental sector in 2024 remains positive, especially considering that Vilnius continues to be a rapidly growing city. In 2023 the population in Vilnius increased by almost 3% and exceeded the 600,000 residents mark for the first time in history," reiterated the Ober Haus report.

"Looking forward, another factor that might contribute to the development of the rental market is the planned deployment of the German brigade in Lithuania. Approximately 5,000 troops and their family members are expected to be located in the vicinity of Vilnius and Kaunas. The main deployment will take place between 2025 and 2026, which means there will be a need for sufficient rental units as early as 2024," added Ober Haus.

Mortgage Market

Interest rates remain high

The average interest rate for new housing loans stood at 5.36% in July 2024, slightly down from 5.7% in July 2023 but still far higher than the 2.46% seen two years ago, according to figures from the Bank of Lithuania.

For new loans, by initial rate fixation (IRF):

  • IRF of up to 1 year: the average interest rate was 5.31% in July 2024, slightly lower than the 5.69% a year earlier but still far higher than the 2.36% two years ago.
  • IRF of 1-5 years: 7.99% in July 2024, sharply up from 5.93% in the previous year and 2.98% two years earlier.
  • IRF of 5-10 years: 7.89% in July 2024, up from 6.35% a year earlier and 5.97% two years ago.
  • IRF of over 10 years: 6.35% in July 2024, up from 6.27% in the previous year and 5.43% two years ago.

For outstanding loans, the average interest rate was 5.74% in July 2024, higher than the 5.51% recorded in July 2023 and 2.11% two years earlier.

For outstanding housing loans, by maturity:

  • Up to 1-year maturity: 5.87% in July 2024, up from 5.69% in the previous year and 3.3% two years ago.
  • 1-5 years maturity: 6.78%, up from 6.52% in July 2023 and 5.07% in July 2022.
  • Over 5 years maturity: 5.73%, up from 5.51% a year earlier and 2.1% two years ago.

More than 99% of all housing loans have a 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.

Lithuania House Price Indices in Major Cities graph

New housing loans falling, but outstanding amount continues to increase

During 2023, new mortgage loans worth €1.74 billion were drawn, a decrease of over 19% from a year earlier. This was in sharp contrast to the annual growth of 9% in the prior year and the first decline in the last decade, amidst falling residential property transactions.

New mortgage loans averaging €145 million were provided every month in 2023, far lower than the monthly average of €180 million provided in the prior year.

"With an increased Euribor rate, the annual average interest rate for new mortgage loans in Lithuania almost doubled in 2023," said Ober Haus.

Despite this, the total outstanding amount continues to increase. In July 2024, total housing loans outstanding rose by 6.6% to €12.65 billion from a year earlier, following an increase of 6.14% in 2023 and 12.1% in 2022, based on figures from the Bank of Lithuania. The growth of the outstanding housing loans averaged 8.8% annually from 2016 to 2021.

About 99.8% of the loans have a maturity of more than 5 years.

Lithuania House Price Indices in Major Cities graph

Though as a percentage of GDP, the size of the mortgage market fell slightly to 16.8% in 2023, from 17% in 2022 and 18.1% in 2021. The mortgage market grew to about 22.4% of GDP before the 2009 global financial crisis, sharply up from a mere 0.4% of GDP in 2000 but remains one of the lowest in the European Union.

"In 2023, the total national mortgage loan portfolio reached a historic high. According to data from the Bank of Lithuania, at the end of the year the total value of outstanding housing loans stood at €12.1 billion," said the Ober Haus report. "As the nominal Lithuanian GDP increased by 6.6% and the value of total outstanding housing loans increased by 5.8%, the debt to GDP ratio decreased by 0.2 percentage points to 16.8%. This rate is one of the lowest in the European Union (EU average in 2022-42.7%)."

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.