The economy and real estate market have rebounded, but global developments remain the biggest risk

In 2024, Lithuania’s GDP grew by 2.7% in real terms, compared to just 0.3% growth the previous year. One of the most significant economic developments for both businesses and residents was the decline in interest rates. The volume of construction work increased by 6% in real terms, although building construction specifically declined by 4%. For the past two years, wages have been rising faster than housing prices, a positive trend for market recovery. However, one of the main risks remains a potential housing supply shortage in Vilnius. Slower business expansion and the now-standard hybrid work model have led to higher office vacancy rates in Vilnius. Meanwhile, slower commercial real estate development in Kaunas and Klaipėda has created both demand and opportunities for new office spaces. In the legal sector, new practices are emerging, with expectations that the process will adhere to the principles of reasonableness and proportionality.

LITHUANIAN ECONOMIC AND REAL ESTATE MARKET REPORT 2024-2025

In 2024, Lithuania’s economy grew faster than expected. Manufacturing output increased by 4.7% in real terms, ranking third in the European Union. This strong performance was driven by a well-diversified manufacturing base and export markets. Retail trade turnover rose by 4.8% in real terms last year, which came as no surprise. Household incomes grew by 10%, inflation remained low, and purchasing power improved. While purchasing power is expected to grow more slowly this year, lower interest rates will support consumer spending. Currently, the European Central Bank’s (ECB) key interest rate on bank deposits stands at 2.75%, with financial markets expecting it to fall to 2% by year-end. The construction sector contributed positively to Lithuania’s economy in 2024, despite a 4% decline in building construction activity.

“Overall, Lithuania’s economic growth exceeded expectations last year. There are many factors supporting even faster growth this year, but in the short term, global geopolitical tensions and potential trade wars pose the biggest risks. As a small, open economy, Lithuania could be significantly impacted,” says SEB Bank economist Tadas Povilauskas.

SEB Bank Economist Tadas Povilauskas

In the second half of 2024, Vilnius’ primary housing market saw a significant breakthrough. A total of 3,281 new homes were sold or reserved, a 47.3% increase from 2023. Meanwhile, 4,503 new properties were introduced to the market—1.5 times more than in 2023. The supply of available homes grew by 25%, rising from 3,560 to 4,536 units. By the end of 2024, completed or nearly completed homes made up 30% of the total supply, down from 40% a year earlier. As market activity increases, this share is expected to decline further.

With high prices and demand from both first-time buyers and investors, smaller apartments continue to dominate the primary market. Prices saw only a modest increase over the year, with the median price rising 6.7%, from €3,111 to €3,318 per square meter. In 2024, wage growth and a potential supply-demand imbalance will be key factors influencing prices. Rental prices remained stable, with yields ranging between 5-7%, though they may decline slightly in 2025.

“One of the biggest challenges for Vilnius’ housing market in 2025 will be balancing supply and pricing. Rising wages and falling mortgage rates have brought buyers back to the market, but a lack of supply could upset this fragile balance and lead to stagnation,” says Tomas Sovijus Kvainickas, Head of Investment and Analysis at Inreal Group.

Revised State Data Agency (VDA) figures suggest that the shortage of building permits has eased, but the market still lacks a sufficient reserve. An additional 1,000 new apartments per quarter is only enough to sustain a moderately active market.

Lower prices in the older housing segment will make homeownership more accessible for lower-income buyers. However, higher costs of upgrading to a new home may discourage owners of older properties from selling, potentially limiting supply in the secondary market.

Tomas Sovijus Kvainickas, Head of Investment and Analysis at Inreal Group

In Kaunas, the primary housing market has been growing at a steady pace. In 2024, developers reached agreements (including reservations) for 797 newly built homes, a one-third increase compared to 2023. This was closely aligned with the new supply of 826 homes, which grew by over 25% year-on-year. By the end of 2024, the primary market had 750 available units, 3% more than the previous year. Kaunas saw a sharper price increase than Vilnius, with the median price rising by 11.7%, from €2,447 to €2,734 per square meter. Rental prices remained stable, with yields ranging between 6-8%.

“A growing population and a well-balanced primary housing market may encourage more developers to turn their attention to Lithuania’s temporary capital. Diverse developer visions would provide greater variety in new housing and could contribute to faster population growth—especially in the coming years, as the opening of Rail Baltica terminals will enhance Kaunas’ connectivity with Vilnius and other European capitals,” forecasts Tomas Sovijus Kvainickas.

In Klaipėda, the primary housing market followed trends similar to those in Kaunas and Vilnius. In 2024, developers secured 292 sales and reservations, an 8% increase from the previous year, while 257 new homes were introduced to the market. Structural changes in supply and market transparency contributed to a price drop, with the median price falling by 8%, from €2,390 to €2,198 per square meter. Rental prices fluctuated more than in other major cities, but yields remained similar to those in Kaunas, ranging from 6% to 8%.

“Klaipėda’s population in 2024 reached its highest level in over a decade. This growth creates opportunities for new residential projects, bringing people back to the city center, revitalizing western districts, and enhancing the port city’s overall appeal. One of the key upcoming attractions will be ‘Mėmelio Miestas,’ a development set to offer new offices, residential units, and commercial spaces,” says Tomas Sovijus Kvainickas.

In the business center segment, the main challenges remain unchanged: slower expansion of foreign service centers, limited growth among local businesses, the widespread adoption of hybrid work models.

In Vilnius, business center development in 2024 outpaced market demand. Meanwhile, slower commercial real estate expansion in Kaunas and Klaipėda has created both demand and opportunities for new office spaces. This is particularly relevant in Klaipėda, where available office space is not scarce, yet many tenants are eager to relocate to more modern premises.

Sustainability will also pose challenges for business center owners, as stricter environmental regulations are making financing for older buildings more difficult. This trend is expected to drive renovation or conversion of aging properties.

A reform in state land management, which grants municipalities the right to manage state-owned land, has introduced several new procedures, such as: municipal councils approving state land transactions, the requirement for multi-agency approvals.

In practice, these changes have not simplified the process. Disagreements between key institutions—the National Land Service and municipalities—are common. Additionally, municipal councils meet less frequently than market participants would prefer, causing delays and inefficiencies.

This evolving situation underscores the importance of adhering to legislative principles. The Law on Legislative Framework mandates that before adopting any legal norms (especially laws or amendments), authorities must assess feasibility, proportionality, and consult stakeholders—including market participants and industry associations.

“On November 1, 2024, a significant package of amendments regulating construction and urban planning came into effect. This new regulatory framework is still taking shape, and we can only hope that the more ambiguous provisions will be applied with reasonableness and proportionality,” says Artūras Kojala, Partner at COBALT Lithuania, specializing in Real Estate and Infrastructure.

Artūras Kojala, Partner at COBALT Lithuania, Real Estate & Infrastructure Practice Group

About INREAL

INREAL is a brand that brings ideas to life, delivering unique projects, professional services, and added value for businesses, clients, and partners. INREAL positions creativity as a core value in today’s dynamic business environment. The INREAL Group consists of UAB Inreal, UAB Inreal tarpininkavimas, UAB Inreal GEO, and UAB Inreal Valdymas (along with its managed companies). The group develops real estate projects and offers one of the most comprehensive real estate service portfolios in Lithuania, operating in 12 cities across the country. With over 30 years of experience, INREAL has successfully completed more than 70 diverse real estate projects, earning recognition and awards both in Lithuania and on the international stage. The companies within the INREAL Group are part of AB Invalda Privatus Kapitalas.

About SEB

SEB is a leading Nordic financial services group, driven by the belief that entrepreneurial minds and innovative businesses play a crucial role in building a better world. Our mission is to support them through all economic cycles, helping them achieve their ambitions and drive success. In Sweden and the Baltic states, SEB provides clients with financial advisory services and a full range of universal banking solutions. SEB’s operations in Denmark, Finland, Norway, and Germany focus primarily on corporate and investment banking services for businesses and institutions. With a presence in 20 countries worldwide, SEB employs around 15,000 professionals.

About COBALT

COBALT is one of the largest law firms in the Baltic region, offering comprehensive legal services to local, regional, and international corporations, investment funds, financial institutions, businesses, and private clients across all areas of business law. COBALT has been recognized as the “Best Law Firm in the Baltics” seven times. Leading legal directories, including Chambers Global, Chambers Europe, Legal 500, and IFLR 1000, consistently rank COBALT among the top law firms in the region.

About CITYNOW

CITYNOW is a real estate intelligence platform designed to track new developments. It features an interactive map displaying planned and ongoing projects, along with key project details. The platform currently maintains a database of over 2,500 residential projects across major cities in Lithuania, Latvia, Estonia, and Poland.

For More Information:

Rūta Merčaitienė
Head of Marketing & Communications, INREAL Group

+370 611 29779 ruta.mercaitiene@inreal.lt