Lithuania Property

Lithuania property, like its Baltic counterparts has some fantastic value right now - we look at the reasons why below.

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Interest rates in Lithuania are around 3%, as it follows the euro interest rates � this clearly means borrowing rates are very attractive, which gives a boost to the Lithuania real estate market.

On purchasing the Lithuania property the buyer pays 0.5�1% of the purchased value as a notary and legal registration fee. The typical broker�s fee is 1.5 � 3.0%. 18% VAT is charged � but this will always be included within the asking price. Overall buying costs are around 3%, which is around the lowest in the world � compare it with Spain at 12% - which is why I would rather buy in the Lithuania property market.

Lithuanians predominantly own their own properties, and even with increasing prices can afford to buy properties as affordability has increased due to such low interest rates. Over 60% of the population own their own properties, and with so much equity in their properties due to previous unattractive borrowing rates � there is so much scope for increased pricing, with strong affordability currently in the Lithuania property market.

In the early years of freedom from Communist rule, all apartments were privatised and all citizens were given property vouchers with which to buy those apartments - and some 97% of the population chose to buy. So there are lot of homeowners in this country, and a lot of people interested in buying property.

And whereas older Lithuanians have tended to sit on their assets and not sell, their younger and more capitalist-minded compatriots have leapt on to the property ladder and started moving up, providing further growth to the Lithuania property market.

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The Lithuania property market has grown with great help from the mortgage market which has been developing for the last two years, with a dramatic increase in locals taking out loans for purchasing residential property. However even now, at least half of all property transactions don�t involve loans at all. Cash payment in full is the way in which business has always been done in the past, and it�s only in the past five years that loans and mortgages have started to come into the picture. The same goes for estate agents; most property sales are still privately conducted between buyer and seller, brought together by advertisements in a newspaper.

Since the country�s entrance into the EU, the banks now offer mortgages to local and foreign clients. LTV is available from 70 � 85% at an interest rate of around 4% and for up to 30 years, while locals can enjoy loans for up to 40 years and even lower rates, meaning the Lithuania real estate market has great attraction for locals and internationls alike.

Just like its Baltic counterparts, Lithuania is seeing huge rises in mortgage lending � with mortgage loans, even though they increased by around 75% in 2005, still only representing 6.9% of annual GDP � so plenty of catching up before it even gets close to the EU average of 48%. So the population as a whole are not strongly geared � compared to the UK, or Australian markets where most people are highly geared, and therefore you can see there is huge growth still to come in the Lithuania real estate market.

The corporate tax rate in Lithuania is 15 per cent, the same rate as income tax on rent and capital gains tax, which is only payable if the property is sold within three years. Lithuania offers one of the lowest corporation taxes in the EU � which clearly attracts foreign investment.

Property tax for land is 1.5% of nominal property value. Companies pay a 1% tax on the property market value. Companies which sell property at a profit always pay the standard corporate income tax rate on the capital gain. The corporate income tax rate today is ef�fectively 19% (15% income tax plus a special 4% social tax on cor�porate profits).

Flights to Vilnius are readily available from London and Ryan Air flies into Kaunas from Dublin, Liverpool and London � as well as Frankfurt and Stockholm. Flights from all major cities into both Vilnius and Kaunas have increased greatly over the last 2 years, leading to big increases in tourists and foreign business men and women arriving.

Unemployment stood at a relatively low 8.8% in 2005 with the capital Vilnius registering only 4.1%. (80% of Lithuanians go to university) - a vibrant growing economy leads to rising house prices.

Politically as mentioned Lithuania is very stable now, and has worked hard to improve itself even before joining the EU. It has very low inflation considering the rate of growth in the country, and stable low tax rates.

Legally investors in Lithuania are well protected � remember in the Doing Business Report done by the World Bank it finished in 15th place in the world.

You can get a mortgage for up to 70 per cent of the purchase price, at 5 per cent interest rate, over 15 years. A lawyer (notara) will charge up to 0.7 per cent of the purchase price.

Again we see the value in Vilnius compared to surrounding capital cities in Scandinavia and Europe. With borrowing at such attractive rates and local salaries increasing rapidly, as well as strong economic growth, this value will only increase.

Therefore Lithuania property offers excellent value to international investors and locals alike.

So the Lithuania property market, like its Baltic counterparts ticks all the right boxes for an investor - attractive borrowing, low buying costs, high % of local homeowners, and low taxes.

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Lithuania Property Investment