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Everything you need to know is included in our Lithuania Property Pack
Are you considering buying real estate in Lithuania? Are you questioning whether it's wiser to make a purchase now or hold off until next year?
When it comes to market timing, there are varying opinions. Your Lithuanian acquaintance might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Vilnius, might have a different view and recommend waiting for more stability.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Lithuania, we dvocate for a fact-based mindset, rejecting unfounded opinions and baseless rumors.
We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here's what we found, which can help you decide whether it's the right time to buy real estate in Lithuania.
Enjoy the article!
How is the property market in Lithuania these days?
Lithuania currently stands out for its remarkable stability
Positive
If you want to invest in real estate, prioritize stability as it attracts sustainable development and investor confidence. It is an information you need as a foreigner who might buy a property in Lithuania.
You probably already know that Lithuania is a very stable country. The last Fragile State Index reported for this country is 38.6, which is an exceptional number.
Lithuania has a strong economy, low unemployment, and a stable political system, all of which contribute to its remarkable stability. Additionally, Lithuania has experienced a consistent period of growth and development over the past few years, making it a strong and reliable partner in the region.
Now, let's examine the predictions for the economy.
Lithuania will keep growing steadily
Positive
Before investing in properties, assess the country's economic strength.
As per the IMF's forecasts, Lithuania is set to conclude 2023 with a growth rate of -0.3%, which is not what we would like to see. Concerning 2024, the consensus estimate is 2.7%.
The reason for this negative growth rate is because there has been ongoing inflation that is affecting people's spending. When prices keep going up, it becomes harder for individuals and families to afford the things they need and want. As a result, people end up buying less, and this has a negative impact on businesses and the overall economy.
However, the negative growth rates are not here to stay since Lithuania's economy is expected to increase by 8.7% during the next 5 years, resulting in an average GDP growth rate of 1.7%.
A moderate growth rate in Lithuania means that property prices are likely to increase steadily over time, providing a good return on investment. Additionally, it suggests that the market is stable and not prone to sudden fluctuations, making it a safe investment.
However, there are other factors to consider beyond GDP growth.
Lithuanian business owners show concern regarding the economy
Negative
The GDP growth matters for property market evaluation, but may not fully align with business community sentiments. Thankfully, in Lithuania there is a standardized metric that is regularly published. It's not the case for every country, so we're lucky.
The Business Consumer Index (BCI) is a metric used to gauge the confidence of business leaders in the economic conditions of the present and future. It is calculated through surveys and assessments.
The Statistics Lithuania's data indicates that the Business Confidence Index is currently -10 for Lithuania. To help you with interpretation, a pessimistic outlook is typically associated with a negative BCI score.
A year ago, business operators were not very confident either. The BCI score was at -4.
This lack of confidence among local businesses in Lithuania can impact individuals looking to purchase property. It may lead to a subdued property market, characterized by decreased investment and slower property price appreciation. Buyers might encounter limited choices in the market and potentially face difficulties in finding motivated sellers or securing favorable financing options.
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Lithuania is providing less building permits
Negative
If you're thinking of investing in property in a country, it's worth considering the number of construction permits authorized for development. More building permits being delivered demonstrates a positive outlook and an encouraging investment climate.
Unfortunately, the number of building permits granted is falling in Lithuania.
Over the course of the last year, according to Statistics Lithuania, the number of building permits issued by the Lithuanian municipalities fell by 11.3%, from 9,958 to 8,833 units.
Clearly, this is a negative sign. Let's explore further data.
One last point to consider - a decline in building permits directly affects the availability of properties. In such a situation, it is probable that housing prices will see an increase in Lithuania in 2024.
Lithuanian property market experiences unstoppable and surging growth
Positive
Lithuania's home prices have increased by 74.0% in 5 years according to eurostat.
It means that if you had bought a country house in Vilnius for $550,000 five years ago, then it would now be worth around $957,000.
In recent times, the Lithuanian property market has exhibited an unbroken pattern of accelerated growth. Property values have consistently risen, and market dynamics have intensified, signaling a buoyant and progressive real estate sector.
f you're considering buying a property in Lithuania, it's a positive sign. The market is lively and experiencing growth. However, it may be beneficial to wait for prices to decrease before making your investment in order to secure a better deal.
You can find a more detailed analysis of the real estate prices in our property pack for Lithuania.
Everything you need to know is included in our Lithuania Property Pack
Lithuania's population is getting significantly richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Lithuania, the average GDP per capita has changed by 11.7% over the last 5 years. It's far beyond the global average.
This means that, if you purchase a modern apartment in Vilnius and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in Lithuanian cities like Vilnius, Kaunas, or Klaipėda in 2024.
Properties promise modest rental yields in Lithuania
Neutral
Rental yield is a common measure in real estate investing.
It lets you know how much money you can make from renting the property.
The website Numbeo indicates that rental properties in Lithuania promise gross rental yields from 2.4% and 5.1%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Lithuania.
It suggests a satisfactory level of income relative to the property's value.
As previously discussed, it's possible that housing prices could rise (because there will be a limited supply of available homes). However, on the other hand, there will be a significant increase in the number of wealthier tenants interested in renting. Consequently, rental yields will probably remain stable in Lithuania in 2024.
Everything you need to know is included in our Lithuania Property Pack
In Lithuania, inflation is projected to gain momentum
Positive
Simply put, inflation is the persistent upward movement of prices.
It's when your favorite plate of cepelinai costs 10 euros instead of 8 euros a couple of years ago.
If you're considering investing in a property, high inflation can offer you several advantages:
- Property values have a tendency to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying your portfolio with real estate provides stability during periods of inflation.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
Based on the IMF's outlook, over the next 5 years, Lithuania will have an inflation rate of 18.8%, which gives us an average yearly increase of 3.8%.
It means that Lithuania is likely to undergo inflation, so buying property now may lead to a profitable sale if its value rises over time.
Is it a good time to buy real estate in Lithuania then?
Now it's time to draw our conclusions.
2024 presents a prime opportunity to invest in property in Lithuania due to a series of favorable signals that indicate a prosperous real estate market. Notably, Lithuania boasts exceptional stability, making it an attractive destination for property investment. This stability creates a solid foundation for property value appreciation and assures investors of minimized risks.
Lithuania's consistent and steady growth further enhances its appeal for property buyers. The country's upward trajectory in economic development indicates a positive environment for property investments. This growth ensures a growing demand for housing and properties, potentially leading to increased property values over time.
The Lithuanian property market is currently experiencing a surge in growth that seems unstoppable. This signifies a robust demand for real estate, presenting investors with an opportune moment to enter the market. The market's current dynamics suggest the potential for substantial returns on investment in the coming years.
Adding to the attractiveness of property investment in Lithuania, the population's increasing prosperity is a promising indicator. As the population's financial well-being improves, the demand for housing and property ownership is likely to rise, contributing to the overall appreciation of real estate values.
While the promising signals outweigh the negatives, it's essential to acknowledge some neutral and negative aspects. Modest rental yields are a neutral signal to consider. While rental income might not be exceptionally high, the other favorable factors, such as stability and growth potential, can compensate for this aspect.
Despite the overall positive outlook, it's worth noting that some Lithuanian business owners express concerns about the economy. This caution could impact certain sectors and indirectly influence the property market. Additionally, the reduction in building permits might initially limit the supply of new properties. However, this could also create scarcity, potentially driving up property values in the long run.
In conclusion, the combination of remarkable stability, steady growth, surging real estate market, improving population prosperity, and the potential for property value appreciation make 2024 an opportune time to invest in Lithuanian property. While there are some neutral and negative signals, the prevailing positive factors suggest a favorable environment for long-term property investment.
We genuinely hope this article has provided you with valuable insights and information.. If you need to know more, you can check our our pack of documents related to the real estate market in Lithuania.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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