Latvia's Real Estate Sector Shows Signs of Growth Potential
After years of stagnation, Latvia's economy and real estate market are showing faster growth, while Lithuania faces rising costs and declining competitiveness.
For a long time, Latvia was considered the economic laggard of the Baltics, but the situation is changing. One key reason was a smaller money supply: the M1 indicator in Latvia stands at just over €20 billion, compared to over €45 billion in Lithuania. After Russia's invasion of Ukraine, Latvia quickly severed ties with Russia, leading to capital outflows only partially offset by EU funds and foreign investment.
Lithuania, meanwhile, benefited from the relocation of Belarusian and Ukrainian companies, such as Wargaming, which moved to Vilnius. This drove up wages and real estate prices: in Vilnius, prime property prices now reach €12,000–13,000 per square meter, with larger apartments costing up to €3–4 million. Such costs are deterring investors, as seen by Continental's decision to close a plant in Kaunas, citing the high cost of living.
Latvia, by contrast, attracted over €1 billion in foreign direct investment last year—a national record. Real estate in Riga is significantly cheaper: the largest apartment deal in 2024 was €1.6 million, while in Vilnius even the bottom of the top 10 deals exceeded €2 million. Lithuanian capital is now actively investing in Latvia, with most investors on the Profitus platform coming from Lithuania.
Lending data also reflects growing confidence: in the first five months of this year, new mortgage volumes rose by 14.3%, and in 2025 they increased by nearly 40%. Developers are restarting projects, wages are rising, and unemployment remains low. Analysts suggest Latvia is at the start of a growth cycle, while Lithuania is in a mature phase, giving Latvia greater potential for faster growth.
