Агентство недвижимости RD Global

Active buyers from Russia and CIS real estate market in Latvia in 1st half of 2009

1. General characteristics of the real estate market in Latvia
1991-1996. The real estate market in Latvia was formed in 1991 after independence, when the state reform of property rights. Until that time almost all property was nationalized and state-owned.

1997-1999. Became an important milestone in 1997: Latvian banks have to lend for mortgages citizens of his state at a sufficiently favorable terms. This gave an impetus to increase the number of trades and prices (available credit led to the demand, which resulted in a rise in prices).

2000-2007. Since 2000, all the more serious impact on the real estate market in Latvia has to render future entry into the EU. Depending on the stage of negotiating the real estate prices rose. This is primarily due to the fact that foreigners began to show increasing interest in the new EU members. Since Latvia joined the European Union, began to provide mortgage financing and foreign banks, which triggered a boom in the Latvian real estate market. Stepped up construction of new housing, reconstruction of luxury houses and apartments in the city center and the spa town of Jurmala. Gradually increase the demand for real estate started in other cities of Latvia. Prices until the middle of 2007 for residential real estate grew by 30-40% per year mainly due to speculative purchases. Restrictions on lending have saved the situation - the crisis in the fall was inevitable and rapid. During this active growth followed by no less devastating decline, on average amounting to 30% from a year highs.

2008-2009. In the past two years continued to decrease activity in all segments of the real estate market. The number of transactions in the housing market in Latvia as a whole decreased by more than threefold. In the major cities of Latvia prices fell by 60% compared to the peak that was reached in 2007, in resort areas as prices have fallen only by 29%, although liquidity has changed. Currently, the cost of standard-type apartment reached the level of 2003-2004.

Today the Latvian market gradually from stage to revive stagnant, increasing the number of transactions, cease to drop prices.

In recent months, the rate of decline in prices has slowed. In June this year the average cost of production in the secondary market apartments in Riga reached 460 euro/ m², which is 1.1% lower than in May and in July, prices have not changed and the drop was only 0.5% reaching EUR 458 / m². According to experts, it is said to stabilize prices.

Prices for new projects is almost liquid reached the bottom, and selling real estate can not be even cheaper - the developer is easier to pass it to the bank in payment of debts. Prices for new construction have stabilized, the lowest price per square meter for new projects is 800 Euro.

The offer of apartments in the public space of Riga continues to fall. Most sellers remove their properties from the market, not wanting to sell them at such low prices. In such a buyers 'market trend, where supply exceeds demand, can turn into a sellers' market, where demand exceeds supply. This, in turn, is a sign that the fall in prices slowed down.

Prices for detached houses fell by 33% - 45% depending on the location and condition. As in other segments, decreased supply of quality property in good locations, from public offerings disappear good private homes. Owners of houses are not ready to sell the property at the price offered by potential buyers.

Also, for quite some time, prices in the segment of luxury homes are kept at one level can only be a small price correction in the sale.

Banks provide funds for the economic content of the alienated property and debtors in the near future it will keep the property, thus holding back price cuts. Given the large proportion of such property, credit institutions controlled and directly affect the market situation as a growing and in a falling market.

2. Profile of foreign property buyers in Latvia
In the first half of 2009, Russians have become the undisputed leader among foreign property buyers in Latvia with a share of 62% of the total number of foreign buyers. If the Latvian real estate market before entering into a crisis were leading the Europeans, but now when the market has almost reached the bottom, first on his back the Russians. In second place with a share of 12% are citizens of other CIS countries (Belarus, Ukraine, Uzbekistan, Kazakhstan). Behind them followed the traditional neighbors, Latvia - 9% of the Scandinavians. Despite the remoteness of the United States of Latvia, the Americans are also actively interested in the Latvian real estate - they account for 5%. Also, the market began to return, and other traditional buyers - German (4%) and Israel (3%). Buyers from other countries is 5%.

In the first half of 2009 the number of requests to purchase real estate in Latvia by the buyers and Russia and the CIS grew by more than 80% over the same period in 2008.

3. Popularity rating of Latvia's regions
The most active Russians and CIS residents buy real estate in the resort town of Jurmala and Riga, the capital. Also, demand for residential real estate Vidzeme seaside (more quiet sea coast of the Baltic Sea). Demand a certain forest land in Latgale (closest to the Russian-Latvian border district of Latvia) and real estate in the port cities of Ventspils and Liepaja.

Popularity rating of Latvia's regions with buyers from Russia and the CIS is as follows:

60% - Jurmala
30% - Riga
5% - Vidzeme coast
1% - Latgale
1% - Ventspils
3% - other regions

4. The structure of demand Russians and citizens of CIS countries on the property in Latvia
The structure of demand among Russians by type of property is as follows:

65% - apartments
20% - villas and townhouses
7% - commercial real estate
8% - other types of real estate

The structure of demand among Russians by price segments:

70% - Economy Class (cost up to 150.000 Euro)
25% - business class (value of 150.000 to 350.000 Euro)
5% - the elite (the cost of more than 350.000 Euro)

5. Features of demand Russians and citizens of CIS countries in the elite segment of real estate
In the elite segment of real estate share of Russians and citizens of CIS countries was as follows:

93% - in buying luxury apartments in new projects worth over Jurmala 500.000 Euro
97% - in deals to buy luxury villas worth over 900,000 Euro on the 1st and 2nd line from the sea in the center of Jurmala
90% - in Riga, in a segment exclusive penthouses and apartments worth over 500,000 Euro

In the second half of 2009 the real estate market of the Baltic States will prevail wealthy buyers who want to take advantage of that makes the current situation.

6. Mortgage Lending
Latvian banks guarantee complete confidentiality of transactions with real estate and, despite the crisis, are ready to consider a mortgage, including non-residents.

Interest rates are much cheaper than they were three years ago, the minimum annual rate in the euro now stands at 2.8% + Euribor. In such conditions it is possible to get a loan for up to 25 years, provided that the borrower has 40% equity. The minimum loan amount 200,000 euros. For the customer presents the essential requirement - a real and reliable pay.

Mortgage loans can be granted to individuals for purchase of residential real estate, and legal entities for commercial purposes.

7. Geography Russians demand for property in Latvia
47% - Moscow
16% - St. Petersburg
15% - North-West Federal District (except for St. Petersburg and the region)
8% - Central Federal District (excluding Moscow and Moscow region)
4% - Volga
4% - Ural
3% - South
3% - Siberia and Far East

8. The main reasons for purchasing real estate in Latvia
50% - a vacation home on the Baltic coast
30% - the possibility of obtaining Schengen visas and residence permits
11% - investment income-
3% - for business and opportunities of the European Union
6% - other reasons

Findings
President of International Real Estate Agency Gordon Rock Stanislav Zingel results of the study commented: "Before wishing to invest in the square footage of Latvia is currently open interesting perspectives. You can take advantage of the crisis and because the price bottom is almost reached, to acquire promising investment object. Many Russians and citizens of CIS is actively investing in the Latvian real estate, as the undisputed leader among foreign buyers of real estate in Latvia. "
Director of International Real Estate Agency Liana Kochetkova recommends: "In Latvia, is to acquire an apartment in Old Riga, apartments in historic homes in the center and a few new projects in the prestigious center. As well as houses and apartments in Jurmala. That holiday properties and apartments in the heart of the capital of Latvia before and will only grow in value. By the way, if an investor requires to take the object out, then it will be useful to know that the stakes in Riga today are quite high for Europe, and the yield rental business at times up to 12% per annum. "

Today, a square meter in the Old Town is worth an average of 1500 - 2000 Euro, compared with 3000 - 4500 EUR/ m² in 2007. It is quite a respectable apartment in the Old Town you can buy for 150.000 - 200.000 Euro.

Prices for new projects in Jurmala, on average, 1300 - 2000 euros per square meter. Apartment 300 meters from the sea area of ​​70 m² that can be purchased for 150,000 euros. House of 200 m² can be "a bargain" for the 180.000 - 300.000 Euro.

In typical homes in the secondary market in a quiet Jurmala apartment available at a price of 500 EUR/ m². Buying an apartment would cost 25,000 - 30,000 dollars. In the center of Jurmala apartment on the secondary market are sold from 980 EUR/ m².

After a dramatic fall in prices interest in buying real estate is shown not only locals but also foreign buyers. Today, the private investor has a chance to find a really worthwhile object at an affordable price.

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