70,000 new real estate properties registered in Lithuania over five years

Some real estate owners were surprised by the jump in their housing values, but the Head of the Property Valuation for State Needs Department at the Centre of Registers, Lina Kanišauskienė, says that the change is natural.

“The surprise is likely due to the fact that the average market values of real estate are aligned with taxable values every five years and, as we know, the economy has grown, real estate prices have increased, and accordingly the values have risen steadily from the currently applicable taxable values, which were approved in 2021. So the jump is significant,” the Centre of Registers representative comments.

70,000 new real estate properties registered in Lithuania over five years

Some real estate owners were surprised by the jump in their housing values, but the Head of the Property Valuation for State Needs Department at the Centre of Registers, Lina Kanišauskienė, says that the change is natural.

“The surprise is likely due to the fact that the average market values of real estate are aligned with taxable values every five years and, as we know, the economy has grown, real estate prices have increased, and accordingly the values have risen steadily from the currently applicable taxable values, which were approved in 2021. So the jump is significant,” the Centre of Registers representative comments.

According to her, real estate values were also affected by the fact that a great deal of real estate was registered in Lithuania over the five-year period.

“It is important to note that over five years a very large amount of real estate has been registered. For example, in Lithuania around 70,000 new properties were registered over five years,” says L. Kanišauskienė.

Meanwhile, Profitus Business Development Manager and real estate market analyst Arnoldas Antanavičius says that such a jump in real estate values was driven not only by economic growth, but also by the convergence of taxable value, which previously used to be more favorable to residents, towards market value.

“What I used to notice earlier was that the determination of values by the Centre of Registers was perhaps not entirely accurate or the values themselves used to be considerably more favorable to residents, because taxable values were very often significantly lower than actual prices – sometimes they differed even twofold. <...> Now we have values that are much closer to real market prices, so naturally this jump has occurred,” the real estate market analyst emphasizes.

Surge in real estate prices in the regions – protection against inflation

According to A. Antanavičius, lower taxable values are more beneficial for people, whereas higher values benefit the state, since with unchanged tax rates more tax is collected. Still, he says, the alignment of taxable values with market prices is a positive thing, as it allows the correct determination of real estate value.

“In any case, taxable values should be as close as possible to market values, because then we will better understand what kind of asset we have, what its value is, how to manage it, how to tax it. <...> I think the taxable value of the President’s house is maybe a few hundred thousand euros, while it is so exceptional that if it had to be sold, it would probably be sold for several million – such a unique glass building in such a location. But according to the average value in that area, there is a lot of relatively cheap property there, and that property is then not assessed quite correctly,” the expert explains.

At the same time, real estate analyst A. Antanavičius notes that the structure of the property tax that will apply from next year is different – previously there was no distinction between the taxation of primary and additional real estate. According to him, more property tax revenue will be collected specifically from owners of additional or investment housing.

“If this is a person’s only property, it is quite fair to pay minimally for it or not to pay at all, at least for now. But if it is investment, additional property, then rates of up to, I think, 1 percent may be set, with a graduated scale, <...> and the step rises upwards. This is all correct and <...> most likely those who proposed this model are planning to collect perhaps even more than they have collected so far, and it will no longer be at everyone’s joint expense, but rather at the expense of those who have simply invested more into real estate. I think such a balance is healthy,” the analyst says, assessing the structure of the property tax.

Property tax will not have a significant impact on home purchases, but rental prices may rise

In his view, this should not have a significant impact on home purchases, except for those individuals who are buying not their first home and will have to pay property tax on it.

“It may be somewhat unpleasant, it may delay some decisions; instead of a thousand transactions there might be 90 transactions <...>, but it should not have a more significant effect. And for those who are buying their first home, this will usually not be relevant, because there are only a few municipalities where those minimum thresholds are exceeded at all. And if people can afford to buy such property, where the set non-taxable thresholds will already be exceeded, then those percentages with a decimal point will certainly not create a problem for them,” says A. Antanavičius.

At the same time, real estate analyst A. Antanavičius notes that the structure of the property tax that will apply from next year is different – previously there was no distinction between the taxation of primary and additional real estate. According to him, more property tax revenue will be collected specifically from owners of additional or investment housing.

“If this is a person’s only property, it is quite fair to pay minimally for it or not to pay at all, at least for now. But if it is investment, additional property, then rates of up to, I think, 1 percent may be set, with a graduated scale, <...> and the step rises upwards. This is all correct and <...> most likely those who proposed this model are planning to collect perhaps even more than they have collected so far, and it will no longer be at everyone’s joint expense, but rather at the expense of those who have simply invested more into real estate. I think such a balance is healthy,” the analyst says, assessing the structure of the property tax.

Property tax will not have a significant impact on home purchases, but rental prices may rise

In his view, this should not have a significant impact on home purchases, except for those individuals who are buying not their first home and will have to pay property tax on it.

“It may be somewhat unpleasant, it may delay some decisions; instead of a thousand transactions there might be 90 transactions <...>, but it should not have a more significant effect. And for those who are buying their first home, this will usually not be relevant, because there are only a few municipalities where those minimum thresholds are exceeded at all. And if people can afford to buy such property, where the set non-taxable thresholds will already be exceeded, then those percentages with a decimal point will certainly not create a problem for them,” says A. Antanavičius.

Read the full article here: https://www.lrt.lt/naujienos/verslas/4/2727266/nt-mokestines-vertes-tapo-artimesnes-rinkai-kiek-tai-paveiks-iperkamuma-ir-nuomos-kainas