The analysts of Inreal participating at the conference organized by the Lithuanian Association of Real Estate Development (LNTPA) stated that the annulment of VAT relief for heating may become a difficult challenge to the housing market in the country. Our living space exceeds the rates by 3-4 sq.m. at an average than it should be according to the economic indexes of the country (GDP per citizen). 
 

The average living area per person in Lithuania is approx. 29.5 sq. m. – i.e. very close to the Czech Republic, where VAT relief for heating is not applicable, while GDP per citizen is higher by a fifth. Meanwhile, the VAT rate for heating in Latvia is higher (12 percent) than in Lithuania (9 percent); respectively the average living area per person is also less – i.e. 28 sq. m.

“If VAT relief was annulled today, it is possible that the real estate market would be deluged with a living area covering so many square meters that can be built in several years. In the context of 2015, the escalations could have a very strong hit for the real estate developers”, - stated Arnoldas Antanavicius, the Head of Consulting and Analysis Department of Inreal. According to him, it regards the old-construction large apartments – difficulties to sell them may occur and their prices would fall. Undoubtedly, other segments of the residential real estate market would also respond. Particularly, it would have effect on the housing market in the regions.

“On the other hand, if VAT relief is annulled after 5 years, the impact would not be as painful as today, and possibly null after 10 years, because the economic welfare in Lithuania would have increased enough for the residents to be able to live in larger housings without tax relief for heating”, - stated A. Antanavicius. 

ABOUT INREAL GROUP
Inreal Group uniting JSC “Inreal valdymas”, JSC “Inreal” and JSC “Inreal GEO”, provides probably the widest spectrum of services in Lithuania, related to real estate. Inreal group companies belong to SC “Invalda privatus kapitalas”. About 90 employees are currently working in Inreal group; management of 130 thousand sq. m. of premises and 2170 ha of agricultural land; mediations in lease or sale of more than 550 thousand sq. m. of commercial premises, over 550 thousand sq. m. of residential premises, over 1,000 residential housing objects, and over 300 land plots. The companies mediate in 50 residential housing projects and 24 investment objects or their portfolios. More than 4900 valuation reports and 80 consultations (feasibility studies, investment memorandums, and market research) are drawn up annually. The value of asset of valuation is above 2.5 milliard Litas. Company offices or representations are operating in Vilnius, Kaunas, Klaipeda, Siauliai, Panevezys, Mazeikiai, Alytus, Plunge, Utena and Taurage. Currently JSC "Inreal Valdymas" develops two real estate projects: houses in Nida "Kopu vetrunges" ("Dunes weathervanes") and apartments and commercial premises in Klaipeda old town "Danes uzutekis" ("Danes Bay").

More information:
Arnoldas Antanavicius
Inreal
Head of Consulting and Analysis Department
Mob. +370 5 273 0944
arnoldas.antanavicius@inreal.lt

Ruta Mercaitiene
INREAL GROUP
Manager of Marketing and Communication
Mob. +370 611 29779
ruta.mercaitiene@inreal.lt