The Lithuanian housing market: rising from the depths to new heights

Following a challenging period from 2022 to 2024, the Lithuanian housing market experienced one of its fastest recovery periods in 2025, both historically and compared with other European countries. Even without the results for December, it is clear that activity in the housing market will be around a fifth higher this year than in 2024. A total of over 50,000 apartments and houses are expected to be purchased in Lithuania this year, marking the third time in the country’s history that annual sales have surpassed this threshold. According to the Ober-Haus review, previously such high sales volumes were only achieved in 2005 and 2021.

‘It is safe to say that the housing market’s recovery this year is comprehensive. Firstly, almost all municipalities in the country are recording higher housing sales than in 2024. There has also been a significant increase in activity across the country in both the house and apartment segments, as well as in the primary and secondary markets,’ said Raimondas Reginis, research manager for the Baltics at Ober-Haus.

According to R. Reginis, the rapid recovery of the housing market was driven by positive changes in the finance sector, with the average mortgage interest rate falling by over 2 percentage points in the last two years, returning to levels last seen in September 2022. The scale of buyers returning to the loan market is evident in the volume of new loans issued, which is expected to be 55-60% higher than a year ago. A record number of new housing loans are also expected to be issued, totalling around €3.3-3.4 billion.

Clearly, the abundant cash flow into the housing market has enabled sellers to increase their asking prices. While the average annual growth in apartment sales prices in the country’s major cities was one of the lowest in the last decade at 2.9% in 2024, Ober-Haus estimates that growth will reach 7.0–7.5% in 2025. The average wage is forecast to grow by around 8.5% this year, meaning that nominal household income will grow only slightly faster than housing prices.

It should also be noted that inflation in Lithuania remains higher than in the Eurozone, significantly reducing the population’s purchasing power. Therefore, it is not surprising that, in a context of rapidly rising residential property prices, residents are particularly active in purchasing older homes, which are attractive due to their lower prices. For instance, in the capital city, where housing prices are the highest among major cities in the country, sales of older apartments reached an all-time high in 2025. Meanwhile, sales of new apartments in the capital’s primary market remain a sixth lower than in the record year of 2021,’ says R. Reginis.

Seeing the housing market recover, it is important that developers have been trying to increase the pace of apartment construction by offering new projects to the market. However, given the current level of housing demand and the rapidly declining number of completed and unsold apartments, development volumes in the country’s major cities could be higher. This is particularly relevant for homebuyers in Kaunas, where fewer apartments will be built for sale in 2025 than in 2024. Therefore, it is not surprising that the increase in apartment sales prices in this city will be the fastest among all major cities in the country this year, with average annual growth reaching 8.0–9.0%.

Although there will be no shortage of buyers in the housing market in 2026, they will remain sensitive to both price and the geopolitical environment

The 2025 housing market indicators have clearly shaped market participants’ optimistic expectations, with developers striving to build as much as possible and sellers aiming to achieve the highest possible prices. Given these sentiments and the country’s positive economic outlook, there is every chance that the housing market will reach new heights in 2026.

Several regulatory changes coming into force next year will be important for the housing market. ‘The most significant of these is probably the change to the second-tier pension accumulation system, whereby, from the beginning of 2026, residents will be given the opportunity to withdraw their accumulated funds,’ says R. Reginis.

According to calculations by the Bank of Lithuania, residents could withdraw around €1.1 billion in accumulated funds during the first half of 2026 (the first wave of withdrawals from the pension accumulation system). Various surveys suggest that up to 20% of these funds could be invested in residential real estate.

‘However, it should be understood that not all of these funds would be used for the direct purchase of housing, but also for renovating or constructing existing properties. In other words, part of these funds would go to the retail and construction sectors,’ notes R. Reginis.

For example, a survey by Hubel, a research and marketing consultancy, found that 9% of respondents plan to use money withdrawn specifically for housing purchases. If one-tenth of the funds withdrawn from the second pension pillar were to be allocated directly to housing purchases, an additional €100 million could be injected into the country’s housing market by the first half of 2026. Is this a significant amount for the country’s housing market? A total of over €4 billion is expected to be spent on housing purchases in Lithuania in 2025, meaning the additional €100 million could increase the country’s housing market turnover by 5%. Although this relative increase does not seem very large, it would still stimulate the rapidly recovering housing market. However, it is likely that, by the second half of 2026 and 2027, this additional money from pension funds will no longer be as significant.

Also, from August 2026, changes to responsible lending rules will come into effect, reducing the required deposit for first-time buyers from 15% to 10%. It is difficult to estimate the proportion of potential homebuyers who could benefit from these changes. Firstly, borrowers must meet certain requirements, and secondly, lending institutions will assess each buyer’s creditworthiness individually and determine the size of the down payment themselves (not necessarily the minimum allowed). Nevertheless, it is evident that some prospective buyers will be able to seize the opportunity to purchase a home with the minimum down payment permitted, thereby contributing to the expansion of the housing market during the second half of 2026.

According to R. Reginis, if sufficient factors indeed stimulate the housing market next year, the biggest challenge will be the rise in residential property prices. ‘After a fairly rapid increase in housing prices this year, we should expect a more moderate, yet still significant, rise in prices in 2026. In a market with growth potential, it would be naive to expect stable sales prices, but an overly rapid increase is also unlikely,’ says the expert.

Firstly, the factor of falling interest rates, which recently drove the market recovery, is no longer present. The ECB is signalling that the cycle of interest rate cuts is over, and that rates should stabilise in 2026. Average interest rates on new housing loans in Lithuania also suggest they will remain stable at around 3.6% from mid-2025 onwards. Therefore, housing affordability next year will largely depend on growth in household income. Economists predict that wage growth will steadily slow down, with average wage growth not exceeding 8% by 2026. Meanwhile, average annual inflation in the country will be similar to that in 2025, exceeding 3%. ‘Therefore, it is likely that, in 2026, apartment prices in the country’s major cities will grow at a similar rate to that of real household income, with average annual growth reaching around 4–6%. A more rapid rise in housing prices would limit some people’s ability to purchase their desired property, forcing them to choose smaller or lower-quality housing, or even postpone their purchase plans and remain in the rental market,’ predicts R. Reginis.

A sufficient supply of new housing is crucial for maintaining a balanced residential property market. In a healthy, competitive environment, buyers can expect a diverse and ample choice of housing, as well as slower growth in housing prices. However, when the supply of new housing is too low and prices for such housing rise more rapidly, buyers look for cheaper, more affordable options on the secondary market. This contributes to faster price increases in this segment as well. These are precisely the trends that have been observed this year. Therefore, in order to exploit the market’s potential and help prevent housing prices from rising too rapidly, developers will have to regularly offer new projects to the market, especially in Kaunas and Vilnius, in 2026 and beyond.

However, the greatest source of uncertainty remains the tense geopolitical situation, which directly impacts our country’s economic structure, including trade flows, energy resource prices, immigration and foreign investment. Despite these challenges, the 2025 housing market indicators show that Lithuanian residents remain largely resilient and continue to invest in housing in their country. In recent years, there has also been a growing flow of Lithuanian investment, both business and residential, into the real estate markets of Central and Southern Europe. “Therefore, the greatest threat in 2026 remains a possible escalation of the geopolitical situation, which could dampen local consumption and the desire to purchase housing in Lithuania,” says R. Reginis.