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Is the golden age for investments in Vilnius Newtown over?

Gustas Germanavičius
Is the golden age for investments in Vilnius Newtown over?
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Zaha Hadid Architects's project for Vilnius railway station as part of a renovation project called Green Connect. Visual: Negativ.

As more Lithuanians take interest in property investment, the rapidly developing and conveniently located Vilnius Naujamiestis (Newtown) is under the spotlight. However, the market has changed considerably recently, meaning that this area is not necessarily a great investment opportunity.

“Naujamiestis was probably the largest district of Vilnius a few years ago, developing a reputation as an attractive property investment location”, commented Gustas Germanavičius, CEO of InREnto, a crowdfunding platform offering financing into rental property lease agreements.

“Around 10 to 15 years ago, the most attractive part of Naujamiestis for property investors included Pylimo and Švitrigailos streets. Very soon after, properties near the roundabout on Savanorių Avenue started to attract investment. The appeal of this district for property investors is reflected in the fact that there are hardly any vacant properties for development remaining near the central part of the city, the Old Town.  Also property prices in some parts of Naujamiestis have increased recently to exceed those in Užupis or Žvėrynas," added Germanavičius.

Prices to rise to €4,000 per square meter

There are several technology businesses behind the current expansion in the district. Vinted is already established, Tesonet is setting up its headquarters and a Tech Zity collaboration space is in the planning stages. Several new and large residential projects have been developed in Mindaugas, St. Stepono and Aguonų streets, with smaller developments in Kauno and Panerių streets.

“With the rapid rise in the number of offices in the district with well-paid jobs, apartment prices are increasing exponentially. It is highly likely that additional areas of Naujamiestis will sell for between €3,000 and €4,000/sq.m, including existing apartments up to Švitrigailos or Panerių streets,” said Germanavičius. “The post-quarantine property market is extremely active, with sellers aiming to buy and sell property for more than they are worth, which is contributing to price inflation.”

According to data from Aruodas.it, the average price of residential property in Naujamiestis has increased by 54% in the last five years, from €1,859 to €2,850/sq.m. Over the same period, the district’s average price of commercial premises increased by 45%, from €900 to €1,305/sq.m.

“Rental prices in Naujamiestis do not have the same growth rate. The average rental price of residential real estate has increased by 20% over five years, and commercial real estate by 15%. This makes is the perfect market for sellers, but less so for investors seeking higher returns,” Germanavičius commented.

InRento’s real estate expert went on to say that if an investor is able to acquire real estate with a projected rent of 5% return on investment, this is a very good result in current market conditions. “Among the properties currently for sale – especially those located between Algirdo street and the Old Town – there is no shortage of rental yields of just 3%. To earn better returns requires more specific knowledge and due diligence. A good investment property is one that can be repaired or improved before being quickly rented or sold. We are able to offer our investors opportunities to get involved with fully occupied and tenanted projects in Naujamiestis that pay almost 7% net rental income”, he added.

Naujamiestis is a safe and secure investment

Although there has been a slowdown in development in Naujamiestis, this area remains attractive for property investors looking for low risk, high security deals.

“Vilnius will certainly not decline. On the contrary, it will expand in the direction of Vilkpėdė and Naujininkai, keeping Naujamiestis in the spotlight for savvy property investors. People will always want to live close to the heart of the capital, so investing in Naujamiestis has minimal risk. In the future, prices should not decrease here, as in the Old Town, but a high return on investment shouldn’t be expected either”, Germanavičius concluded.

On the other hand, InRento’s CEO is confident that the area of the capital close to the railway station in the southern part of Naujamiestis, has very attractive investment potential: “At the moment, the area is not as attractive for residential or office development, mainly because of the few recreational spaces located there, the busy bus station and outdated infrastructure. However, if we manage to implement the district renewal project “Vilnius Connect”, which was promised in 2019, we will see some of the best investment returns in the streets surrounding the station in Vilnius.”