Latvia may be at the start of a new growth cycle, economic data and real estate trends suggest

For a long time, Latvia has been the slowest-growing economy in the Baltics, but recent indicators point to a possible turning point. One of the main reasons for the lag was the relatively small amount of money circulating in the economy: Latvia's M1 money supply is just over €20 billion, compared to Lithuania's €45 billion.

After Russia's invasion of Ukraine, Latvia quickly severed its economic ties with Russia, leading to an outflow of Russian capital. Meanwhile, Lithuania managed to attract Belarusian and Ukrainian companies and skilled workers, such as the video game developer Wargaming, which moved its headquarters from Minsk to Vilnius. This boosted Lithuania's economy and real estate sector significantly.

Now, Lithuania is becoming increasingly expensive. In Vilnius, square meter prices in new developments can reach €12,000–13,000, and top apartments cost as much as €3–4 million. In contrast, the most expensive apartment sold in Riga last year was €1.6 million. High living costs in Lithuania are already affecting investor decisions – for example, Continental announced the closure of its plant in Kaunas, citing rising wages and cost of living.

Latvia, on the other hand, is becoming more attractive to investors. Last year, the country attracted a record €1 billion in foreign direct investment. Mortgage lending is also rising: in the first five months of this year, new housing loans increased by 14.3%, and for the whole of 2025, the volume grew by nearly 40%. This indicates renewed confidence among consumers.

Experts believe Latvia is at the beginning of a growth cycle, while Lithuania has reached a more mature stage. If positive trends in foreign investment and wage growth continue, the real estate sector could become a key driver of economic expansion.