Record-breaking success will be replaced by moderation

After an exceptionally successful 2025 for the real estate (RE) market, this year we should expect stabilization: with prices having reached all-time highs, further growth is becoming more difficult, although the upper limit has not yet been reached.

A New Phase

The Centre of Registers reports that last year a total of 132,900 real estate properties were transferred in Lithuania through purchase and sale transactions – 16% more than in 2024. Some project developers called 2025 a record-breaking year or the biggest recovery in five years.

Last year was indeed good, agrees real estate market analyst and Head of Business Development at “Profitus,” Arnoldas Antanavičius. According to him, two main forces operate in the real estate market.

“One force consists of fundamental factors, such as residents’ income, changes in income, economic development, the tax environment, availability of financing, and borrowing opportunities. These are indicators that directly affect the amount of money in circulation and people’s ability to buy real estate,” he explains.

“There is also another force and a strong direction – expectations, people’s optimism or pessimism. The cocktail of these two forces most likely determines how the situation in the real estate market will change,” says Antanavičius.

There are periods when both expectations and economic conditions, as well as fundamental indicators, are positive. Examples include 2007–2008, the period before the introduction of the euro in Lithuania, the time before the pandemic, and 2021 after restrictions eased. “In such cases, both real estate prices and transaction volumes grow at double-digit rates,” the expert says.

“One could say that in 2025 a similar cocktail of forces came together, and as a result the real estate market developed rapidly again, with prices also rising at double-digit rates,” he adds.

Real estate broker and head of “Saugi Nuoma LT,” Evelina Meiliūnaitė, also says that 2025 was indeed a year of recovery for the real estate market. However, in her assessment, 2026 will be more a year of stabilization rather than a leap forward.

“We are calling 2026 more of a sellers’ year, as housing prices may rise by another 5–6%,” she predicts.

Antanavičius does not see negative signs but hints that there may indeed be less positivity this year.

“Although the economic situation will remain positive, wage growth will no longer be as rapid. In addition, real estate prices themselves are at all-time highs, and once at such levels it becomes quite difficult to grow further,” he notes.

Three Poles

Market observers believe that consumer expectations this year may be shaped by three main factors related to tax changes: a new real estate tax has come into force, property tax values increased at the end of 2025, updated Responsible Lending Regulations (RLR) will take effect this summer, reducing the minimum down payment requirement for first-time buyers from 15% to 10%, and in January the second-pillar pension reform came into effect, which is expected to increase disposable income for some residents.

How will these changes affect the real estate market?

“People will think that with a lower mortgage down payment, more young families will likely rush to buy homes. That means greater demand, and if demand increases, prices may also rise. Therefore, one should start thinking about it now and perhaps already buy real estate,” Antanavičius describes the potential effect of the RLR changes.

In Meiliūnaitė’s view, the updated RLR will have the greatest real impact on the market. According to her, the 5% reduction in the minimum down payment requirement for first-time buyers is a very significant change and may become the main driver of a new wave of demand, especially in major cities.

From August, the updated RLR will also tighten lending conditions for second and subsequent home loans, with stricter assessments of the income-to-loan repayment ratio.

According to the broker, the new real estate tax will mostly affect not buyers but investors and those owning a second or third home. In such cases, the tax may alter calculations of whether the investment still pays off, especially if the property stands empty or requires constant repairs.

“In the first-home segment, the impact will be limited – people buy a home not as an investment but as a life decision,” she notes.

“In my opinion, the second-pillar pension reform will not have a major impact on the market either. Yes, some parents may take advantage of the opportunity to withdraw funds and help their children buy their first home, but these will be isolated cases rather than a mass phenomenon capable of fundamentally changing demand,” she adds.

Antanavičius believes that various expectations push consumers to act today, but in practice expectations are quite fragile. According to him, the situation can easily change due to a shock outside Lithuania, and expectations can quickly shift from very positive to more conservative.

“We saw what the situation was like in 2022 when the war in Ukraine began,” he reminds.

“When people are able to buy a home with a 10% down payment, they will need roughly the same amount of money, because by then prices will already have increased.”

The Affordability Problem

According to economists’ forecasts, residents’ incomes should grow again this year, creating opportunities to continue borrowing and purchasing real estate. However, Antanavičius doubts that wages will grow at double-digit rates, as some market participants predict for property prices.

“Maintaining double-digit real estate price growth when prices are already at record levels is difficult. More likely, prices will grow in line with inflation or, at best, wage growth,” he says.

Housing affordability problems prevail across Europe, and Lithuania is certainly no exception. As Meiliūnaitė says, lowering the RLR threshold for first-time buyers may help some young families enter the market sooner, but it is not a magic solution:

“It makes it easier to enter the market, but housing prices themselves do not automatically become lower – especially if demand increases faster than supply.”

Antanavičius notes that the market has already shown its reaction.

“The paradox is that before the announcement of the RLR update there was one price level, and once it was announced that the down payment requirement would be reduced, sellers’ expectations became clear very quickly: listing prices increased by 5–10%, because everyone began to expect prices to rise. So they need to start selling at higher prices already now,” he says.

“The paradox is that when people can buy a home with a 10% down payment, they will need roughly the same amount of money, because prices will already have increased by then.”

The logic of improving affordability by stimulating demand has never yielded, and likely will not yield, positive results, says the market analyst:

“To improve affordability, one must not only ease demand but also address increasing supply, so that speculative investors seeking to profit from such expectations do not remove a relatively large share of properties from the market. If supply were sufficient for everyone, there would be a real chance that prices would not rise.”

Is There Still Anything to Buy?

“Developers are making sure there is something to buy,” Antanavičius responds.

“Every year they offer a similar number of homes and gradually even increase it, despite frequent public concerns about the heavy bureaucratic mechanism, as obtaining a building permit sometimes takes not two but five, six, or even more years. Developers have already come to terms with this. Some are close to completion, while other projects may still be planned for three more years until permits are obtained.”

He adds that Lithuania can be proud of having many active people: not only large companies but also smaller developers and investors take on construction projects, reconstruct old buildings, renovate them, divide unused premises into smaller units, and change their purpose. This also creates supply and opportunities for people to invest in real estate.

Although supply remains a real issue in Lithuania, the number of projects is increasing each year.

“Of course, new construction prices are significantly high, and not everyone can afford them,” Antanavičius points out.

“For example, in Vilnius, a newly built two-room apartment with finishing may cost around €200,000, and not necessarily in the best location. For a two-person household to buy such an apartment, they would need about €3,000–4,000 in monthly income and a 15% down payment – that is, €30,000,” he calculates.

“These are two average salaries, plus significant savings, and we are talking about a rather modest, compact two-room apartment – luxury is hardly even worth discussing. It is difficult to afford, but we often see young families first buying older housing or property on the secondary market, which is cheaper and more spacious, and later upgrading as their situation improves and the family grows.”

What Is Happening in the Rental Market?

Evelina Meiliūnaitė, head of “Saugi Nuoma LT,” currently sees a somewhat different situation in the rental market than often portrayed publicly. According to her, supply is sufficient, and demand has decreased compared to 2024.

“In 2025, there was clearly more active buying, so some people who previously rented moved into the buyers’ segment. Of course, in 2024 many Erasmus students did not arrive, for example from Israel,” she notes.

“Today the market is becoming more favorable to tenants – they have more choice and real opportunities to negotiate rent prices,” she emphasizes.

She expects rental price growth this year to be very moderate – around 2%.

“Prices are pressured by the overall cost background: higher utility costs and a greater tax burden for property owners. However, these factors do not allow for a sudden price surge, as the market clearly shows that tenants’ purchasing power has limits and competition among landlords is increasing,” she explains.

Riga 30–40% Cheaper Than Vilnius

Antanavičius, who has projects in Latvia and Estonia, says Lithuania has already become an example for the Baltic states in terms of market activity and growth.

“Estonia has been experiencing more difficult economic times: for some time, GDP was shrinking and public sentiment was weaker, with less willingness to invest. Vilnius’ real estate market is leading and is viewed with white envy, as we have managed difficulties well and there are many opportunities for developers to earn. We can be proud of that,” he says.

However, he points to one argument why he is not certain that prices in Lithuania will rise significantly this year:

“For example, in Latvia, in Riga, real estate prices are sometimes even 30–40% lower than in Vilnius. There, developers implement new projects with much smaller profit margins but still strive to offer new homes to a market that also needs them.”

“I see many Lithuanian investors increasingly paying attention to the Latvian market. The assumption is that there cannot be such large price differences between two neighboring capitals,” the expert says.

According to him, there is more potential for the Riga market to start rising from the bottom. Incoming capital from outside Latvia will also bring more optimism.

“This is visible among Latvians themselves – a year ago they were quite skeptical about their country’s and Riga’s real estate market prospects, but now there is much more optimism. A recovering Riga market may encourage even more investment from neighboring countries – Estonia and Lithuania,” Antanavičius does not rule out.

“Ultimately, capital will move where there are more prospects, and Lithuania is not an isolated state, so assimilation may begin. Although Latvia’s situation looked sadder, prospects now appear quite positive – more capital and more investment should arrive. Lithuanian investments in Riga rather than in Lithuania will likely also affect the Lithuanian market,” concludes the real estate market analyst.

Read more: https://diena.lt/naujienos/verslas/ekonomika/rekordine-sekme-keis-nuosaikumas-1738230