The real estate market – what will activity depend on?
Economist Marius Dubnikovas considered that one of the most important investments of every person – real estate – could be directed to almost a billion funds withdrawn from the second tier of pensions: for the initial contribution, to cover the balance of the existing housing loan, to purchase a plot of land or a parking space. Part of the population will allocate funds for housing repairs or updating household appliances.
As Arvydas Avulis explained, the recovery of the real estate market in 2025 was unexpected for both developers and buyers – no one predicted such activity. Could the same growth rate be maintained in 2026?
“I think that part of the market has already run out of steam, so there is no potential to grow as much as the market grew last year. The money withdrawn from the second tier of pensions is a significant amount, but on average the share per person is not large. The reduction of the initial contribution to 10% was necessary a couple of years ago. Now this change will affect the activity of the real estate market, but not as much as imagined,” commented the chairman of the Hanner company’s board.
According to the interviewee, a factor that can really have a significant impact on the real estate market is record investments in defense infrastructure. Construction companies will direct their capacities to these projects in the next couple of years. Labor shortages and limited supply of materials or construction will ultimately affect housing prices.
“Reinforced concrete elements are needed to build apartment buildings, which we are promised to produce only in the fourth quarter of this year, because the same products are also needed for the defense projects being implemented.
If previously we implemented the project in 18 months, I think that the schedule will have to be adjusted – we will finish it in 24 months”, said A. Avulis.
Buy or rent?
One of the most pressing questions for many people is when is the best time to buy a home.
“Lithuanians are quite rational, so they calculate very quickly how much it would cost them to rent a house and how much the loan payments are. So far, the result is more beneficial for those buying a house, but if the European Central Bank decides to increase the interest rate, these changes could already affect the decision of what to do next”, – said A. Avulis in the Compensa Life webcast “More than finances”.
When considering housing not only as a place to live, but also as an investment, it is often compared to other long-term forms of investment and their returns. Compensa Life experts remind that those pursuing long-term financial goals can invest in government bonds, bond funds, savings bonds, corporate shares and bonds, investment life insurance or choose other known investment tools.
Indeed, rental returns are currently around 4%, but the attractiveness of this investment is largely influenced by the rapidly growing property values, which have increased by almost 10% in the last year alone.
M. Dubnikovas reminded of the review published by Eurostat, which compares the years 2010 and 2025: in 15 years, Lithuania is the third country in the European Union after Hungary and Estonia in terms of real estate appreciation, which exceeds 200 percent.
“Ten years ago, housing prices in the real estate project in Žvēryne reached 2,000 euros per square meter, and currently apartments here are sold for 4-5 thousand euros each. Such an increase in value increases the attractiveness of real estate and the desire to invest funds in this particular market. On the other hand, I do not believe that this will always be the case,” said A. Avulis.
Is real estate still affordable for Lithuanians?
A. Avulis calculated on the webcast “More than Finances” that currently the average price of a partially furnished house in the capital reaches 3,800 euros per square meter. m. Finishing work may require another 600-700 euros per sq.m. m.
Housing prices in Western Europe range between 4-5 thousand. euros per sq. m, but already with full decoration.
“In Europe, for example, in Spain or Italy, real estate prices seem quite attractive to Lithuanians. Meanwhile, in London, earning an average salary, it is impossible to buy an apartment near the center. Is it possible that a person with an average income in Vilnius will no longer be able to buy a home?” – thought economist M. Dubnikovas.
“As long as wages are growing, it seems that everything is fine with us, but when growth stops, housing affordability will start to decrease. I think we will observe this phenomenon this year as well. Then the question – whether to buy or still rent housing – will become even more relevant”, concluded A. Avulis.
