Lithuanian real estate market stabilizes after peak activity, economist says

Lithuania's real estate market is showing signs of stabilization after a period of intense activity, according to economist T. Povilauskas. Speaking at an economic forecast presentation, Povilauskas noted that while the first quarter saw transaction numbers similar to last year, the January-April data reveals a modest 2% increase compared to 2023. This suggests the market has likely hit its peak in terms of transactional volume and is unlikely to see significant further growth.

The key factors influencing this stabilization are the increased property prices and a decrease in affordability. Povilauskas highlighted that interest rates are also beginning to cause concern among potential buyers. While he does not foresee a market downturn, the current trend indicates a market that is settling into a more sustainable rhythm. This stabilization, he argues, is a positive development, signaling a mature market rather than one experiencing unsustainable booms.

Data from real estate agencies like Ober-Haus supports this outlook, showing significant year-on-year price increases in major cities like Klaipėda (11%), Vilnius (11.7%), and Kaunas (15.8%) as of March. Eurostat data also indicated a 9.8% rise in housing prices in Lithuania last year. Despite these price hikes, the stabilizing transaction numbers suggest that the market is absorbing these increases, and further significant price growth might be limited. This cautious optimism is shared by SEB bank, which maintains its GDP growth forecast for Lithuania at 3.2% for the year, though it has revised the inflation forecast upwards to 5.7% due to rising energy costs.