On 3 March 2013, Inreal Group, together with its partners the bank Finasta and the law offices COBALT, presented the 2012–2013 Lithuania’s Economy and Real Estate (RE) Market Review. The publication says that a rapid growth of the country’s economy provided positive incentives in the real estate market, in which high level of activity was observed across every segment. In the area of RE law and taxes, the energy performance certificate and changes in land taxation arrangements were introduced.
According to Rūta Medaiskytė, Chief Economist at the bank Finasta, the growth of Lithuania’s economy was one of the fastest in the region and should also maintain the same pace this year.
2012 was a turbulent period for the global financial markets; however, the annual rate of return on shares finally proved to be positive, while the amount of Lithuanian household funds in the form of deposits reached its historic highs – almost EUR 7.8 billion – at the year end. The economic crisis intimidated the population, and cautious expectations about the future made them plan their expenses. So, regardless of low return, the population opted to have liquid and safe funds. ‘Lithuania’s GDP is expected to grow by 3.0 per cent and to retain immunity against recession in the euro zone. In the long-term outlook the fullest possible development of economy is desirable, but this can only happen given recovery in external markets,’ commented Ms. Medaiskytė.
‘In 2012 Lithuania’s housing market was conspicuous by its activity and a growing number of sale and purchase deals – both developers and buyers were active in the market for apartments,’ said Arnoldas Antanavičius, Head of Consultancy and Analysis Department of ‘Inreal valdymas’. According to him, there was an increase in the number of investor buyers, who purchased real estate properties for the purpose of RE lease. In 2012, apartment sale and purchase deals in Lithuania totalled 21 656, which is 6.8 per cent more than in 2011. During the year, apartment sales were renewed or launched in Vilnius, Kaunas and Klaipėda even in 55 projects and resulted in the addition of 3 067 new apartments to the primary housing market – a number even 60 per cent higher compared to 2011. The sales of private houses continued to grow for a fourth year in a row. During the year, 10 205 deals of sale of private houses were concluded in Lithuania, which is 15 per cent more than in 2011. The market for land plots also retained its growth tendencies – 32 228 land sale deals were recorded across Lithuania in 2012, which is 7.5 per cent more than in 2011. The analysts of Inreal forecast that given a continued growth of the country’s economy, the housing sector should perform positively in terms of an increased number of deals and (in certain segments) price increases.
In the sector of business centres the largest degree of activity in 2012 was observed in Vilnius, where construction of new business centres significantly intensified after a few years’ break. Despite the addition of 21 000 sq. m to the market of the capital city, the availability of premises for lease in the capital city further declined. In Kaunas and Klaipėda the segment of business centres remained only slightly active – no modern business centre was opened. In 2013 the market for business centres in the capital city should remain the most active: the demand for modern office premises will rise, and new projects will push up rent levels. 2012 was a year of hope for the country’s logistic facilities: the space of available vacant premises shrank; rent levels rose by 5–10 per cent on the average. Although vacancy rates remained particularly low for a second consecutive year, very little construction of storage facilities intended for lease was undertaken. Due to high demand, 2013 should see a continued growth of rent levels. This will promote the development of new projects.
In 2012, the country’s tourism sector continued to perform excellently. Due to consistently growing flows of foreign tourists performance indicators of airports and hotels soared to their historical highs. In 2013 such consistent development of the sector should continue, attracting increasingly more attention of foreign investors. It is likely that we may see new international hotel chains entering Lithuania’s market, which would further contribute to the development of the sector.
‘Last year, similar to 2011, no material changes occurred in legal regulation that would be capable of facilitating substantially real estate acquisition, development or sale procedures. Quite much attention was given to amendments to legislation governing legal relations of construction, including the implementation of European Union directives,’ stated Aušra Mudėnaitė, partner at the law offices COBALT. One of the changes that is particularly relevant for RE market players is that since 9 January 2013 the energy performance certificate has become mandatory for all buildings and premises available to buy or rent. In addition, RE developers should pay attention that since 2012 documents authorising construction are again issued for a fixed term, and the technical supervisor of construction works is required to take out third party liability insurance.
As regards taxes, major changes are related to variations of land taxation arrangements. On 1 January 2013, a new wording of the Law on Land Tax entered into force, providing that from now on the value of land for tax purposes is linked to the average value of land on the market rather than land capability rate. Besides, in place of the currently applicable tax rate of 1.5 per cent legal acts provide for the right of municipal councils themselves to set a tax rate or rates within the range between 0.01 and 4 per cent, as defined by the Law.