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Investing into Residential Real Estate in Lithuania - Value Drivers and Risks for Individual Investors

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  • Ieva Augutyte-Kvedaraviciene

Abstract

Real estate investments become more and more popular form of investing in Lithuania. Prime reasons for this are relatively cheap financing, growing income of residents and growing economy in general. Investments into residential real estate represent the most popular type of real estate investment among individual investors. When buying a residential unit with the purpose of value appreciation and income generation, individual investors often overlook major value drivers for real estate investments in a long run. Overconfidence, normalcy bias, expectation bias, bandwagon effect and other cognitive biases in decision making may lead to overvaluation of particular investment, general growth of demand and, finally, prices of real estate. The paper discusses major value drivers of residential real estate and major risks when investing into residential property, with special attention to low financial literacy of market participants, major cognitive decision making biases and limited knowledge how real estate market operates in general.

Suggested Citation

  • Ieva Augutyte-Kvedaraviciene, 2017. "Investing into Residential Real Estate in Lithuania - Value Drivers and Risks for Individual Investors," ERES eres2017_22, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2017_22
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    More about this item

    Keywords

    decision making biases; Investments; Residential Real Estate; Risk; value drivers;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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