Real estate market in Latvia

The real estate marketbegan its development leap only at the beginning of 90s, and during thelast 10 years this sector experienced a transition from the very rapid development and growth to the crisis and the stagnation period.

Sector development tendencies

The time of hope

• From the 2000 to 2004 the real estate sector showed a slight but steady increase in prices. This trend has affected both the denationalization and privatization processes that took place in the 90ties, and the purchasing ability of the population is low and loan availability is limited.
• The market rocked along with the expected changes related to Latvia joining the EU and NATO, and becoming more attractive to different investors.
• Until 2004 theprice for square meter grew and reached 450 Euro.
   

''Fat years”

• Along with Latvia`s jointing the EuropeanUnion and NATOin spring 2004, the real estate market experienced a new phase.
• Banks offered residents mortgage and consumer loans at low interest rates, and the loans were granted on beneficial terms. The market became notably warmer thus becoming increasingly more attractive to foreign investors.
• Already in June 2004, one month after joining the EU, the price for one square meter reached 500 euro.
• In 2005 the price per one square meter is 1000 euro. According to the record of the International real estate company Knight Frank in 2006 the price for  one square meter during this time has grew by 66.6%, which at that time was the absolute world`s records.
•  The price reached its maximum in summer 2007 - 1720 euro per one square meter.
   

Period of decline

• The situationrapidly deterioratedrapidly in the second half of 2008, whenLatvia was affected bythe economic crisis.The situation wasgreatlyaggravated bythe Lehman Brothersbankruptcy,when the global financialcrisis emerged.
• This regularity lead to problems in the Latvian banking sector, including the Parex Bank nationalization -   loan granting was stopped, purchasing ability of the population fell sharply, the unemployment rate grew from 4% in mid-2008 up to 15% in March 2009.
• Rapid growth of the real estate market has been cut as with a knife – due to the lack of funds, there is practically no real estate transactions, the price for one square meter fell rapidly (on average by 70%), and in 2009 it was close to the price level in 2004.
   

Recovery

• In 2009 the prices reached a minimum scale, in the result of which the number of real estate transactions gradually increased, contributing to small increase of prices.
• In the periodfrom 2010 to 2011 the housingprices have increased by16.4%, in 2011 the square meter of theserial apartment was estimated at 580 Euro.
   

Tendencies in different types of real estate

Apartments

In the first quarter of 2011 the offer of real estate–apartments – grew by approximately 29%. Apartmentprices generallydeclined on average by0.7%.This situation occursdue tonon-compliance withhousing pricesto the current financial situation on thestate, private person and businesslevel.
 

New projects

New residential building projects are emerging and developing in Riga micro districts, Riga vicinity as well in major Latvian cities. Those are designed according to European standards, as well as building exterior is visually designed in a contemporary architectural style.

Elite apartments

For the buyers of elite apartments comfort is more important than the price. Currently, the most valuable apartments are located in the quiet center of Riga, Mezaparks, Old Riga, Jurmala, as well as in the largest Latvian city centers. The experts of elite apartment real estate segment predict a steady and stable prices increase.

The land market

The most demanded land plots in Riga vicinity are still territories of Marupes and Garkalne districts. Overall, the number of deals has dropped by almost a half if compared to the pre-crisis period. The representative of the real estate transaction company "Newsec" Olga Kozina projects that the land market will the last to recover from the crisis.

Commercial objects

This year Commercial object real estate segment shows increased of activity. According to the date of the real estate company "BALSTS" the price level, if compared to the end of 2010, remained unchanged, while the number of transactions increased by on average by 15%. The price level to office premises in  Riga centre and the Old Riga has remained between 10 to 17 EUR per m2, while rent of warehouse and industrial object premises in Riga micro districts and Riga vicinity varies from 1.5 to 3 EUR per m2.

Majorreal estatetransactions

The unified computerized portal of the Land Register of the Republic of Latvia zemesgrāmata.lv periodicallypublishes the date on inthe largestrecordedtransactions. Currently(25.04.2011.-01.05.2011.) the largestrecorded transactionsin the real estate sectors are shown in the following table:

Real estate sector development forecast

According to the research data made by A/s “SEB” bankat the beginning of the year, 32% ofLatvianresidents think that during 2011 the pricesin the real estatesectorshall remain on the previous year level. While themajority ofLatvian residents foresee the increase of prices:

• 47% of Vidzeme residents,
• 43% of Riga residents,
• 41% of Kurzeme residents,
• 30% of Zmemgale residents,
• 31% of Latgale residents.

However, these forecasts may also remain only forecasts, because in contrast to the residents` opinionthe interest in the purchase of housing remains relatively small.