Overly ambitious residential and commercial development projects in Vilnius during the "Baltic Tiger" boom left a glut of empty space, depressing real estate values at a rate greater than the rest of Lithuania. Photo by Nathan Greenhalgh.

VILNIUS — Real estate prices in Lithuania may not have hit bottom, according to interviews with real estate analysts by Baltic Reports.

Given how far prices have already fallen, it’s testament to the level of over-valuation and the depth of the economic crisis that a further decline may occur. Real estate registry records have shown property prices falling roughly 35 percent year on year throughout the country. The most hard hit area is in Vilnius, where prices fell by an average of 42.5 percent since 2008.

“We are getting closer to the stabilization but it is difficult to forecast when the prices hit the bottom as we still have enough economic challenges in front of us,” Saulius Vagonis, valuation and market research manager at Ober Haus, told Baltic Reports. “Anyway, it seems that the number of the transactions hit the bottom already as it grows second quarter consecutively.”

Ober Haus, one of the largest real estate companies in the Baltics, keeps its own index of apartment prices in the five largest Lithuanian cities, called the OHBI. It shows that in the past year since October, prices have fallen over 30 percent, and nearly 37 percent since the peak of the market in December 2007. In both real and nominal terms, this brings the apartment prices back to mid-2006 levels.

The price drop is easing, though. Vagonis said that at the beginning of the year, prices were falling between three and four percent per month, and in the past few months the prices have not fallen more than two percent. Property listings for houses in Vilnius by Ober Haus advertise price cuts, some by as much as 70,000 litai (€20,000).

Neringa Rastenyte, head of Baltic investment and research at real estate consulting firm Re&Solution said the worst could very well be over.

“Lithuania should already be at the bottom or very close to it,” Rastenyte said.

In an email, Rastenyte pointed out that from 1970 to 2005, the largest drop in realty prices occurred in Finland, when the recession in the early 1990s cut housing prices by half. Market conditions then, like easy loan financing and the liberalization of the credit market, are similar to those that lead to the bursting of the last bubble in 2007.

Monthly rental for some non-heated commercial warehousing has fallen to 1 litai per sq m, or just paying for utilities.

“Prices of commercial real estate vary a lot, depending on quality, location, type of tenant, rent level,” Rastenyte said.

Vagonis said that commercial property in general has also “dropped significantly” in the last year. Office space has fallen from 40 to 50 percent, retail from 20 to 40 percent, and warehousing from 20 to 60 percent.

“These numbers make us think that commercial property prices already hit the bottom and shouldn’t drop further,” Vagonis said.