Overseas: The Baltic tiger awakens

Is Lithuania a new European hotspot? Christopher Middleton discovers fairy-tale views - and great prices
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The Independent Online
The temperature outside may be minus 10 Centigrade, but for fresh- faced young Lithuanian estate agent Marius Ciulada, the financial outlook is distinctly sunny. He's 24, he lives with his parents, and not only is he taking home a salary well above the national Lithuanian average of pounds 250 per month, he's also bought a smart apartment in the centre of Vilnius, the capital city, and is renting it out for pounds 240 a month. What's more, that flat has gone up 50 per cent in value over the past two years.

"It's a good location", smiles Marius, as we stand outside his apartment building, admiring its marzipan yellow frontage and its handsome, wrought- iron balconies. It's just five minutes' walk from the Old Town main square. A walk, it should be said, that takes you through a cobblestoned warren of historical buildings - some grand and overpowering, some small and cosy.

"Our biggest stream of purchasers is most definitely from Ireland," says Marius's boss Vytas Zabilius, the director of Ober Haus estate agents. "They are coming over together, they are buying maybe five to 10 apartments at a time and then they are giving them to us to rent out. We had these three Irish friends who came over here and bought six apartments between them", says Marius. "Last year, I sold an apartment to a guy from Dublin who couldn't make his mind up, then finally said `OK, then, I'll buy this flat just for fun'."

Why the Irish liking for Lithuania? It's not just the prices, it seems (pounds 80,000 for a two-bedroomed flat in Vilnius Old Town), it's the similarity between the two countries.

"Think of Ireland 30 years ago, and that's where are today", Remigijus Kabecius, the director general of the Lithiuanian Development Agency, says. "We have a small population (3.5 million), in a large area (bigger than either Denmark or Holland), and although we don't have gold or oil, we do have educated people (80 per cent of Lithuanians go to university). The reason we did not collapse economically when the Soviet occupation ended in 1991, is that our people were able to adapt their skills - thereby transforming us into the Baltic Tiger we have become."

As part of our Old Town tour, Marius takes us to a hilltop courtyard development in Subaciaus Street, where builders are converting a shabby jumble of old flats into three dozen interestingly shaped modern apartments. The flats (pounds 100,000 each) have got two bedrooms, two bathrooms and fairytale views over snow-topped palace roofs and church spires. They've also got (for an extra pounds 6,000 apiece) private underground parking - an essential in Vilnius Old Town, where driving is difficult enough (thanks to a complex one-way system) but finding somewhere to leave your car is practically impossible.

They were all snapped up a year ago, as soon as the conversion plan was announced, Marius says. What he can offer us instead, though, is the perfect downtown penthouse pad, in the form of a split-level aerial apartment at No.10 Odminiu, just a three-minute walk from Vilnius's 16th-century university, and two minutes from its 18th century cathedral. It's got two floors, three bedrooms, a bathroom-cum-sauna, a wooden terrace with rooftop views, and a built-in bar with cocktail stools. Yours for just 570,000 Lithuanian litas - or pounds 114,000.

And if you liked this little Baltic bolthole but weren't able to give it your full, live-in attention, what sort of rent might it bring in? For the first time, Marius rather wrinkles up his nose.

"The rental market is slowing down here," he replies. "Today you could perhaps ask 3,000 litas per month (pounds 600), but there is no guarantee that price will be maintained. The situation in the Old Town (also known as Senamiestis) is that many people have bought apartments, and most are looking to rent rather than sell."

Much of this reluctance to part with property is due to the Lithuanian tax law, which says that if you sell a place within three years of buying it, you have to pay the Government 15 per cent of the original purchase price. So making a quick euro is only possible if you can persuade a new buyer to stump up for your tax liability as well.

Not perhaps as hard as it sounds, given the rate at which Vilnius property prices have risen in recent years, and the keenness with which locals follow the trends. Whereas in countries like the UK, property-buying is seen as a borderline chore, in Lithuania, it's the national hobby.

"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," says Remigijus Kabecius. "Some 97 per cent 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 shinning up. Marketing executive Jolanta Guzaite-Quintus, for example, bought a two-bedroomed flat with husband Peter, soon after they got married. "It cost Û80,000 (pounds 50,000), which seemed a lot four years ago, but now is nothing", says Jolanta. "And the best bit is, we've already paid off the loan in full."

In Lithuania, 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.

Not a course of action recommended to British buyers, of course - unless your Lithuanian is up to scratch. And in a country where "yes" is not "si" or "ja" but "taip", and even a simple name like David Bowie gets Lithuanianised to Deividas Bovis, you're better advised to go through an estate agent who can put you in touch with a good lawyer (notara) and a structural surveyor. And don't panic, there's still plenty of buildings left in the Old Town, albeit not in prime condition.

"Now the big opportunity is to refurbish old buildings and to convert small office buildings back into apartments", says Vytas Zabilius. "A lot of businesses are moving out of the Old Town to the big, new business area on the right bank of the River Neris, near the Europa Centre (31 floors). So there will be a call for new and improved buildings in the Old Town - tasteful and in keeping, of course."


Where is it?

On the Baltic Sea, south of Latvia and Estonia

How to you get there?

Daily three-hour flights from London Gatwick

The best place to buy?

Vilnius, especially the Old Town (left) - a labyrinth of historic churches and houses, incorporating the old Jewish ghetto, now in the process of being re-built after Nazi obliteration in the Second World War. Lots of bijou coffee shops and cavernous bars serving strong beer at 80p a half- litre and vodka at 50p per glass. As the market develops, you might consider Kaunas, the second city, or seaside resort Klaipeda.


Ober Haus has English-speaking staff. Tel: 00 370 5 266 65 55, www.ober-haus.lt.


Usually given in euros and Lithuanian litas (five litas to the pounds 1) and sold by the square metre. An Old Town, two-bedroom apartment costs about Û104,000 (pounds 72,500). A similar-sized new apartment costs about pounds 89,500.

Legal and finance

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. There is no stamp duty.