Linas Jegelevičius
The Central Bank of Lithuania states that wages have been growing faster than housing purchase and rental prices for the past year and a half, and if this trend continues, housing affordability could return to the historically high levels of 2020 by the end of next year.
“The Bank of Lithuania predicts that housing affordability will improve further in 2025 due to rising wages, stable housing prices, and declining interest rates. By the end of 2025, affordability is expected to reach levels where an average homebuyer could purchase 77 square meters of housing, a significant improvement compared to recent years,” Gediminas Šimkus, the Governor of the Bank of Lithuania, spoke at a recent conference organized by the central bank.
However, real estate developers remain cautious.
Žilvinas Rėklaitis, a real estate broker in Alytus, a town in southern Lithuania, described the local real estate market as “quite complicated” in an interview with BNN.
“We have many sellers looking to offload properties, but very few buyers. Various factors contribute to this, including high interest rates, geopolitical tensions, and the general gloom of late autumn. Banks now require a 20% down payment – an increase of 5% – which, for many, makes a significant difference,” he explained.
As an example, out of 122 apartments currently listed on the real estate website skelbiu.lt, only five have been reserved,
with the rest still awaiting buyers—an important indicator of the market’s sluggish activity.
Romas Perminas, a broker at 011 Real Estate Agency who specializes in the seaside market, is more optimistic, noting a positive shift as the EURIBOR rate decreases, spurring renewed activity.
“Previously, we had many so-called tourist-type buyers – holiday visitors in Palanga who would view apartments or houses out of curiosity. Now, such buyers are almost entirely gone, and we are seeing only serious, committed buyers,” R. Perminas emphasized to BNN.
“The real estate market in seaside municipalities, including Palanga, is influenced by seasonality. Sales peak during the high season – from June to October – and slow significantly in the off-season, particularly for second-home purchases,” he said.
The EURIBOR interest rate has been declining since late 2023, providing some optimism,
but many buyers are waiting for tangible reductions in mortgage burdens. The average interest rate for newly issued housing loans has dropped from 5.79% to 4.85% over the past year. However, rates for existing loans decrease more slowly, as most borrowers recalculate their EURIBOR rates every six months.
Raimondas Reginis, Head of Market Research at Ober-Haus for the Baltic States, one of the major Baltic real estate companies, noted to BNN that the Lithuanian Apartment Price Index (OHBI) for October 2024 increased by 0.3%.
Over the last 12 months, apartment prices in Lithuania’s five largest cities – Vilnius, Kaunas, Klaipėda, Šiauliai, and Panevėžys – rose by an average of 3.4%.
In October alone, prices grew by 0.2–0.5% across these cities.
“For the past two years, the trends in apartment prices have remained consistent – overall price levels continue to rise incrementally. The drop in market activity did not reduce prices but instead led to longer sale periods and slower price growth rates. Most sellers have adapted by either waiting for buyers or halting sales altogether. Only a small number of sellers, particularly those needing quick sales, offered significant discounts,” R. Reginis observed.
There might be more signs signalling a speedier recovery.
October 2024 marked the fourth consecutive month where housing sales exceeded those of the same period last year. According to the Register Center of Lithuania, housing transactions in October were 19.4% higher than in September and 20.2% higher year-over-year. October 2024 was also the most active month for the housing market since late 2021.
Data from the Bank of Lithuania and Citadele Bank shows that the moving average for new housing loans rose to 163 million euros in September, the highest in 14 months, marking a 5.8% annual growth. Real estate transactions also surged, with the 12-month moving average for home sales reaching its highest point in 11 months.
According to Darius Burdaitis, head of Citadele Bank’s Lithuanian branch, the real estate market is definitely recovering from its low point.
“Consumer confidence, combined with lower interest rates, will drive recovery. By early 2025, we anticipate even stronger growth, supported by improved borrowing conditions and optimistic financial forecasts,” he said.
However, the affordability challenge remains acute, particularly in Vilnius, where an average buyer needs 7.1 annual salaries to afford a home. By contrast, affordability is more favorable for higher-income professionals, such as those in the IT sector, compared to education sector employees, the central bank says.
To address affordability issues sustainably, the Bank of Lithuania suggests expanding the real estate tax base to reduce housing’s attractiveness as an investment and ensuring state subsidies are targeted. Unchecked subsidies, as seen between 2020 and 2023, accelerated price growth in metropolitan areas.
Declining affordability is also driving growth in the rental market, creating higher demand and more competitive prices.
“Supply is a critical issue – not just quantity, but quality and accessibility of housing must also improve,” says Tomas Sovijus Kvainickas, RE expert at Inreal Group.
Agreeing that the trajectory is edging upward, R. Perminas emphasizes that, generally speaking,
investing in real estate has always been and will remain the most attractive form of investment for Lithuanians for years to come.
“The war in Ukraine will end someday – and I think it will not last long, meaning that tourism will rebound and more potential buyers – from abroad too – will show interest in local real estate. Lithuania has so much to offer – the wonderful nature, serenity, accessibility, security, and high living standards,” R. Perminas underscored to BNN.