Citus experts: the purpose of the purchase changes everything – three different scenarios for choosing a home. Which one is yours?

Different purchase objectives – for living, renting or investing in value growth – require tailored evaluation criteria. Today’s financial realities show that personal financial management is becoming increasingly important. The pension reforms underway in Lithuania clearly show that relying solely on the pension system is no longer enough – additional sources are needed to ensure a dignified old age. It means that we must not only think about how to make ends meet today, but also take care of our financial future.

Investing in real estate is considered one of the safest forms of long-term investment, which is even recognised by the legal system – the Civil Code guarantees property rights and provides legal protection, providing owners with legal protection and long-term confidence in the stability of their investment. It provides stability and confidence that investments in real estate are protected and will not be easily violated. Meanwhile, other investment instruments such as stocks, bonds or cryptocurrencies can be much more volatile, requiring constant market monitoring and specialised knowledge.

When buying a home for yourself, the decision becomes very personal. Return on investment (ROI) calculations and market cycle forecasts are not the only factors that matter here – how you will feel in that place every day is the key priority. It is a decision about your quality of life: peace, comfort and emotional security.

Around 60% of home buyers in Lithuania purchase property with a loan. Therefore, the first important aspect is financing. Interest rates have a significant impact on affordability. For example, with an annual interest rate of 3.8%, a monthly payment of EUR 900 allows you to purchase a home for approximately EUR 230,000. However, if the interest rate is 5.8%, affordability drops to around EUR 180,000. This difference can limit not only the size of the flat, but also the choice of neighbourhood.

In our calculations, we estimate that the bank’s interest rate is around 1.5%, with the remainder being a 6-month Euribor rate which, following another reduction in the European Central Bank’s base rate, currently stands at around 2.15%.

The Bank of Lithuania’s responsible lending guidelines stipulate that monthly financial commitments should not exceed 40% of an individual’s income. To find out the maximum amount that can be allocated to loan repayments, multiply your monthly income by 0.4. For example, if a family’s income is EUR 2,000, the maximum monthly repayment would be EUR 800. You can then calculate the amount of the loan you can obtain.

Here are the approximate loan amounts by monthly payment:

At least an approximate assessment of the loan ceiling allows you to narrow down the number of options that can be safely purchased without exceeding the limits of responsible borrowing.

Additionally, if this is the family’s second home (one having been purchased earlier), banks often require a 30% down payment instead of the usual 20%. This significantly changes the planned purchase strategy.

Suppose you plan to buy a new home after selling your current one. In that case, it is essential to conduct a detailed analysis, assessing the property’s value, the remaining loan balance, personal income tax implications and the terms of the new loan.

If a profit is made on the sale of the property, 15% income tax (GPM) may be payable if the property is sold within 10 years of purchase. However, the tax does not apply if a new home is purchased within one year of the sale and it is the family’s principal place of residence.

We often want everything at once – a bigger flat, an extra room, perhaps space ‘when we have children’ or ‘when I work from home’. However, it is worth asking yourself: do I need this now? On average, people change their homes every seven years. Therefore, it often seems like a better decision to choose a smaller yet high-quality home that suits your current stage of life and then naturally move to a larger one later.

When analysed over a more extended period, the value of a home as an asset tends to increase; for example, a two-room flat that costs around EUR 160,000 today may increase in value to EUR 210,000 in seven years. In this case, changing homes becomes a logical progression, allowing you to accumulate capital gradually. Two-room flats are currently the most sought-after on the market, so their prices tend to grow the fastest in relative terms.

Newly built homes are often an attractive choice for several reasons. First, they ensure lower maintenance costs and higher comfort thanks to modern construction methods. Such homes typically retain their value and exhibit rapid growth, especially when accompanied by well-developed infrastructure and strong potential demand. Meanwhile, older homes – although cheaper – often require more investment in renovation and refurbishment.

However, if the investment is made strategically by purchasing a home in a well-developed area with growing potential, an old home can become a profitable investment. Nevertheless, a new home is a more reliable choice for those seeking stability, lower maintenance costs and greater liquidity.

When choosing a home, it’s not only the numbers that matter but also how you feel daily. Do you want to cook dinner while watching the sunset? Is the nursery within walking distance? Is there a green space for walks? Details like these determine whether your new home will be a place where you truly enjoy living.

When choosing a rental property, it is essential to consider not only the numbers but also the person who will be living there. Are they looking for a quiet neighbourhood? Do they need quick access to the city centre?

The answers will help you not only plan your return but also choose the type of tenants and how to communicate with them.

A property for rent should be viewed as a financial tool. Its attractiveness depends primarily on its versatility, location and potential return.

Currently, the Vilnius rental market generates an average annual return of 5%, but in some districts or projects, this return can reach 5.5–6%. The return rate is calculated by dividing the annual rental income by the total investment amount.

Location has the most significant impact on returns. Tenants are usually looking for convenience rather than a view from the window: how many minutes it takes to get to work, whether public transport is nearby, and whether there are shops, kindergartens and sports clubs.

Currently, the most expensive districts in Vilnius are Senamiestis (approximately 23 EUR/sqm), Paupys (approximately 22 EUR/sqm) and Naujamiestis (approximately 19 EUR/sqm). These are places where everything is within walking distance, and the pace of life is uninterrupted. However, it is also worth paying attention to neighbourhoods where prices are rising rapidly.

For example, in Markučiai and Žirmūnai, rents have increased by more than 50% over the past five years, and in Naujamiestis, by as much as 58%. It means that neighbourhoods changing often have excellent investment potential.

In terms of supply, two-room flats currently dominate the Vilnius rental market, accounting for almost half of the total supply; one-room flats account for approximately 33%, and three-room flats for around 15%. This distribution shows that one– and three-room flats are also worth considering. Their supply is lower, and the rental price can be up to 15% higher. Additionally, they are more attractive to families and long-term tenants, resulting in lower turnover and a more stable income stream.

When buying a property to rent out, it is essential to understand that this is not a personal decision but one intended for the market. The property does not have to suit the owner’s taste; it must be attractive to as wide a range of tenants as possible.

The easiest way to set the price is to analyse similar properties in the same area. Secondly, assess the condition and features of the property: a well-maintained, modern property can be rented at a higher price. Seasonality is a significant factor, as rental prices are often higher before September, the start of the academic year, due to increased demand for housing.

Finally, the length of the lease also affects the price: long-term contracts, despite often lower prices, ensure a steady income. Short-term rentals can offer higher prices but with greater risk and potential downtime.

It is often overlooked that one month of an apartment remaining unrented can be more costly than a lower rental price.

For example, if you want to rent a property for EUR 700 per month, but the real market rent is EUR 650 per month, a month’s downtime will not only wipe out the rental income but also require you to cover the utility bills, which average around EUR 150 per month. By setting a lower price right away, the annual income would have been EUR 7,800; with a higher price and a month of vacancy, it would have been EUR 7,550.

It is essential to consider all the costs involved including loan interest, property maintenance expenses and long-term appreciation in value. Even with a more modest rental return, the investment can still be profitable if the property’s value increases.

When investing in value growth, it is important not only to calculate but also to imagine: what will this neighbourhood look like in 5–10 years? What kind of people will it attract?

Will a community form here, or will there be a high rate of resident turnover? Questions like these help to identify potential before it becomes apparent. Investing in a property to sell it at a profit in a few years requires a data-based assessment of the neighbourhood. Three main factors determine value growth:

· development potential – infrastructure, business investment and jobs, and educational institutions;

· competitive environment – supply size and dynamics;

market cycle – changes in housing prices over a certain period. Such questions help to view investments strategically rather than from a short-term perspective.

Price changes or ROI figures alone are not enough to make an informed investment decision. It is necessary to examine the underlying causes of price increases, including municipal infrastructure plans, the expansion of educational institutions, competitive supply (are there ten similar projects in the vicinity?), the city’s strategy and even changes in the population.

Often, these changes signal an increase in value even before it is reflected in prices.

The attractiveness of the market and the rate of value growth are closely linked to the balance between supply and demand. Citus data shows that over the next five years, property values in developing neighbourhoods – Žirmūnai, Naujamiestis, Vilkpėdė, Naujininkai – may increase by 30–40%, while in mature neighbourhoods such as Senamiestis, Antakalnis and a significant part of the residential areas by about 20–25%.

For example, according to Citus analysts, the three districts that have seen the highest growth in value to date are Vilkpėdė, Užupis (including Paupys) and Šnipiškės. In Vilkpėdė, new-build flats cost around EUR 1,565 per sqm in 2018 and EUR 3,920 per sqm in 2025, meaning that the prices of new flats have risen by approximately 150%. Eight new projects with approximately 1,160 flats were developed, and four projects with 835 flats are currently under development. In Užupis and Paupys, new-build flats have risen in price by around 136% since 2018, and in Šnipiškės by 129%.

Meanwhile, the districts that are likely to see limited future value growth are Antakalnis, Žvėrynas and Naujoji Vilnia. The districts mentioned above already have high price levels and limited development potential. Naujoji Vilnia lacks a coherent urban vision and is dominated by old flats.

Areas with the most significant potential for future real estate value growth in Vilnius are becoming increasingly apparent. These include Naujamiestis, Žirmūnai and the northern part of Naujininkai. The conversion of the railway station will bring about the biggest change in Naujamiestis and Naujininkai, one of the city’s most ambitious projects. In Žirmūnai, the conversion of the bus depot and the city’s ambition to implement the ‘15-minute city’ concept are gaining growing relevance. In Naujininkai, whose northern part borders the city centre and the Old Town, prices are still lower, but several higher-end projects are already planned.

Market activity is currently being sustained by expectations of lower interest rates and buyers’ confidence that property values will continue to rise. This suggests that the first half of 2025 will remain a period of activity.

The most important thing is not to catch the ‘perfect moment’ but to understand when that moment is in your life. Market conditions change, interest rates fluctuate, but life does not stand still. Therefore, it is important not to procrastinate but to make a decision when there is a clear need – then a home becomes a solution, not a problem.