The Lithuanian property market

The year 2022 was unexpectedly a roller coaster for Lithuania and the region. Despite facing a potent combination of challenges not seen in recent history, the country's economy still managed to grow, with a 1.9% rise in GDP. With high prices, one of the highest inflation rates in Europe (18.9% annual average HICP rise), low unemployment (below 6.0%), constrained consumption, and rising interest rates, a new period has begun.

One of the economy's key pillars, manufacturing, is slowing down, as are exports. Future growth prospects will heavily depend on foreign demand. In fact, foreign investors already doing business in the country continue to make long-term plans and

Russia will all play a role. Domestic consumption also factors in. The economy is expected to remain stable with up to 1% GDP growth and inflation controlled at 8-9%, but this will require effort. The government's budget includes programs to promote exports, investments, and aid to help residents and businesses manage rising energy costs.

Real estate investment transactions decreased in 2022 due to the market's phenomenal performance in 2021 and increased uncertainty. Local investors remained active, but seller and buyer return expectations diverged.

Projections for 2023 are varied. The extent of the economy's potential recession, the speed of price growth, and Ukraine's support in its conflict with

In the Baltic region as a whole, real estate investments totaled over EUR 840 million last year, with about EUR 365 million in Lithuania. The retail segment in Lithuania attracted the most interest, with total investments of about 220 million, a rare occurrence for a single segment. Even in the high-demand Lithuanian office segment, this amount was surpassed only once before.

After a long period of uncertainty, yields moved upwards. Both prime and secondary segments were affected by the change in expectations. The evolution of the high-interest-rate environment will determine the duration and extent of yield increases, but the “new normal” may arrive sooner than expected.

Contact:

Kristina Živatkauskaite˙ k.zivatkauskaite@newsec.lt