Of the three ‘Baltic Tiger’ countries, Lithuania always seems to miss out on getting the top prize whenever you look at economic data, always seeming to get pipped to the post by either Estonia or Latvia, at least that’s the case in recent years.
This is perhaps a little surprising considering the economic strength of the country – it very narrowly missed out on being eligible for joining the Eurozone in 2007 only because it missed the maximum inflation target by a measly 0.1%
In comparison with most other property markets, however, Lithuania’s performance is nothing to be sniffed at, with a very respectable 21.7% growth in 2007. There were a lot of signs now that 2007 could very easily be Lithuania’s year in order to bypass its two Baltic neighbours in terms of growth. Certainly this is what Knight Frank believe. They tipped Lithuania to be the number one market in 2007 with a predicted 20% growth in property prices during the year.
Why were they so confident?
As is the case with Lithuania’s two Baltic neighbours, Estonia and Latvia, Lithuania has everything going for it at the moment – an economy that’s heading in the right direction fast, no barriers to foreign buyers and the best mortgage deals of offer anywhere except for booming Latvia.
Vilnius seems to have a lot of unfulfilled potential as a tourist destination. A lot of money is currently being spent on restoring the city centre to its former glory – it should all be finished pretty soon. Currently the only budget airlines to fly from the UK or Ireland to Vilnius are the domestic carriers, although RyanAir flies into nearby Kaunas. Should more of the budget airlines start flying there, then Vilnius has the potential to really take off as a major tourist city, which is sure to lead to increased property prices and rental yields.
Although prices during the first half of 2007 have continued to grow, signs are that this may not continue much longer. Chances are that, if Knight Frank were to redo their forecasts for the second half of the year, Lithuania would be well down from the top spot.
Property in Vilnius is now looking overpriced – more expensive than any of the other major cities in the Baltic region, including Stockholm, Helsinki and Copenhagen. Rental yields are also among the lowest in Europe now – another sign that property is too expensive.
In the Spring of 2007, the runaway growth of all three of the Baltic States has started to alarm economists who have started talking about the possibility of the countries' economies going into meltdown. Rating agency, Standard and Poor, downgraded the credit rating of all three Baltic States, including Lithuania in the late Spring/early Summer period, fearing that the region's high inflation rates could lead to major problems ahead. Although Lithuania is causing somewhat less concern than either Latvia or Estonia, the similar policies of the three countries means that there are still strong risks that Lithuania's economy will also face a 'hard landing', which would be sure to have a negative effect upon property prices.
Although there are good medium and long-term prospects for property in Lithuania, particularly when it comes to suburban houses, which are proving to be increasingly popular with affluent locals, the current economic fears regaring Lithuania and its two Baltic neighbours means that, for now, investors could well be advised to look elsewhere if they are looking for a fast return on their money.
Additional Background Information
The above contains our thoughts on the current state of the market. But, like any type of investment, there are no guarantees as prices are always influenced by a huge number of different variables.
You can keep abreast of developments in the market by checking out the articles in our News section where we’ve trawled the Internet for every story connected with property in Lithuania so you don’t have to. By checking the news reports regularly and thinking through the consequences of each piece of news, you should be able to get a good idea as to how quickly or slowly property prices in the market are going to rise in the near future.
The information in this section only tells half the story, however as only a small proportion of Lithuanian property news is translated in English, which means that the locals are getting a lot more useful information than foreigners are.
Investing in the wrong markets could make the difference between making tens of thousands and losing tens of thousands over the next few years. If you’re seriously considering investing in Lithuania, then you should think of subscribing to our Premium Service so that you can get all the breaking news from the market at the same time the Lithuanians are hearing it.
Click here now to get better informed.