Latviski English По-русски
Tuesday 22.08.2017 | Name days: Rudīte, Everts

Economic Diary of Latvia. Housing to become cheaper next year

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUNext year, the average growth of housing prices in Latvia will likely become negative, experts believe. The reason for this is that the government has reviewed its policy on residence permits in Latvia.

The rise of housing prices in Latvia began in 2011, when amendments to the Immigration Law provided foreigners with the opportunity to receive residence permits in Latvia by buying real estate properties. In certain segments price growth rates had exceeded pre-crisis figures.

However, after the more recent amendments to this law had come into force this September, it has become harder for investors to receive residence permits in exchange for purchase of real estate properties. As a result, the number of non-resident customers has basically come close to zero. On top of that, deputies of the 11th Saeima had also approved amendments to the law that provide a halt on the issue of residence permits until the end of the crisis in Ukraine.

This resulted in a decline in the number of deals with non-residents. This will likely cause a decline of prices in the most popular segments, believes Citadele Bank Private crediting department Baiba Tetina.

According to her, prices are expected to stop their rise in the near future. There may even be a decline in prices in segments of the market where residents make up the majority of buyers. The reason for these changes is the will to introduce a principle of handing over keys in crediting. His means the person who has taken a loan can hand stop payments by simply handing over real estate properties to the crediting institution.

SEB Bank had reviewed conditions of providing mortgage to clients at the beginning of October. Even now it is clear that the availability of mortgage options has reduced significantly – compared to the September, the number of mortgage loans issued in October had reduced by 50%. ‘There is a possibility of mortgage no longer being available outside of Riga and several other large cities. This is because of low demand on real estate and high risk level even if the customer can afford the first 50% instalment,’ – says member of SEB Bank management Ieva Tetere.

Swedbank also provides mortgage loans, but only if the customer can afford the first instalment of 30%.

Take quality over quantity

Information from the Central Statistical Bureau of Latvia regarding labour market changes in Q3 2014 points to a decline in the proportion of job seekers among economically active residents aged 15 to 74 from 10.7% to 10.6%.

Swedbank senior economist Lija Strasuna explains this dynamic with a decline of working-age population as a result of emigration and negative demographic trends.

Because of entrepreneurs’ caution, new jobs are created at an insufficient rate.

The bank believes the aforementioned factors have led to a 2% decline in the number of working people in comparison with last year. Because population decline progressed slower than it did last year, the level of employment in Latvia has slightly increased – up to 59.3% of working-age population (59% last year).

The decline in the number of employed persons in the country may slow down consumption rates of households and Latvia’s economy in general, warns the expert. According to her, production output serves as Latvia’s main growth engine this year. A smaller number of employees can now produce more than they could last year. This creates a foundation for wage growth.

With that, however, the situation differs among industries. For example, there has been a decline noted in Latvia’s processing industry. This may be related to the continuing process of optimization and replacement of workers with machinery. In the segment of transport and tourism, on the other hand, there has been an increase in the number of employees. This is in spite of the decline of demand from Russia. Employment remains stable in internal trade. After growth in the second half-year of 2013 and beginning of 2014, construction sector demonstrates a decline in Q4 of 2014.

There is currently no reason to expect a recovery of employment growth, especially in relation to uncertainty and cautiousness of entrepreneurs because of the unstable geopolitical situation, believes Strasuna. Experts do not see any reasons for mass lay-offs as well. It is likely that the proportion of job seekers will continue to decline below 11%.

Minimum wage is a matter up for interpretation

According to latest legislative changes, minimum wages in Latvia are to be increased by EUR 40 starting with January 1st, 2014.

However, employers are likely to reduce the burden on some of the workers, so that it is not necessary to increase their wages, believes Chairman of Latvian Trade Unions Peteris Krigers.

‘We have received such signals. We have not merely received such signals; we know this is how it is going to be. There had been entrepreneurs that optimized their expenses in the last year’s increase of minimum wages – they transferred their employees to part-time shifts or had introduced contracts. There are different ways of solving such problems,’ – he said.

Krigers did not take it upon himself to predict how many employed persons can expect wage rises. He did say this will likely affect small and medium-sized enterprises.

When asked if the government’s decision to increase wages has any weight and whether or not it will accomplish what it is expected to do, Krigers said it will apply to employees of state enterprises and state institutions.


Leave a reply

Traders: following VAT decline, prices of goods will decline as well

Latvian Association of Food Traders supports Agriculture Ministry’s proposal to reduce VAT rate for food and separate food product groups. Traders confirm that this step will also reduce food product prices in stores.

The most major risks and solutions for real estate purchase and rent with option to buy

To acquire housing in one’s property, often residents use rent with an option to buy. Sworn attorney Zanda Zaluma of Eversheds Sutherland Bitāns shares advice resident should keep in mind when signing real estate contracts.

Finance Minister: businessmen will be forced to pay larger wages

The current market situation shows that Latvia should speed up its education reform and think about attracting additional human resources from other countries, said Latvian Finance Minister Dana Reizniece-Ozola in an interview to Latvijas Radio.

Latvia to procure Stinger anti-air missile launchers

A mutual contract has been signed between Latvian Defence Ministry and Danish Defence Ministry for the procurement of anti-air missile launchers used by the Danish armed forces, as confirmed by Latvian Defence Ministry.

Oil prices and stock exchange indexes decline in Europe

On Monday, 21 August, oil prices declined. Exchange indexes in USA increased slightly, whereas exchange indexes in Europe declined because of concerns over the policy implemented by the administration of US President Donald Trump.

Terrorists in Barcelona were planning three explosions

Terrorists, who performed two attacks in Catalonia last week, were initially planning to blow up three shuttle buses in crowded areas in Barcelona, as reported by El Espano.

Lawyer: Maxima wants to earn by reducing compensations for the tragedy

Maxima Latvija and Zolitude 21.11 have reached an agreement on payment of EUR 900,000 to support victims of Zolitude tragedy – EUR 5,000 to EUR 75,000 to each person, as reported by Maxima Latvija.

Producer prices in industry in Latvia grew 0.4% in July

Compared to June, the level of producer prices in Latvian industry rose by 0.4 % in July 2017. The prices of products sold on the domestic market increased by 0.5 %, whereas the prices of exported products grew by 0.3 %.

Enefit: Latvia reduces electricity price difference with neighbouring countries

In recent years, Latvia has managed to reduce the electricity price difference with other Baltic neighbouring countries, as reported by Enefit Chairman Janis Bethers.

Farmers Saeima: butter price will not remain high for long

The high price on butter in Latvia will not remain so high for long, said Farmers Saeima Vice-Chairperson Maira Dzelzkaleja-Burmistre in an interview to 900 seconds programme of LNT.

Aseradens elected as chairman of Unity; Krisjanis Karins to lead party’s city council faction

Unity elected Economy Minister Arvils Aseradens as the new chairman of the party. MEP Krisjanis Karins has been elected as the party’s leader in Riga City Council with Santa Zarane as his deputy.

LPS manager: forming the budget, it is important for municipal funding to stay the same

In the formation process of the next year’s state budget, it is necessary to guarantee finances do not reduce for municipalities, said the chairman of Latvian Association of Local and Regional Governments Gints Kaminskis in an interview to Latvijas Radio.

Police to organize inspections in stores; parents asked to watch their children as well

For the new school year, Riga Municipal Police will be performing regular inspections at stores, bars and cafes from 21 August to 31 August, as well as the first days of September, to make sure minors are not sold alcohol and tobacco products, BNN was told by police.

Colder masses of air to enter Latvia this week; more rain expected

This week’s weather in Latvia will be dictated by a cyclone hovering above Northern Europe. Colder masses of air will flow into the country. A lot of rain is expected in Latvia this week, as reported by State Environment, Geology and Meteorology Centre.

Kirsis asks police to assess possible forging of votes at Riga City Council

Riga City Council’s Unity faction chairman Vilnis Kirsis has asked State Police to check if the city council’s electronic voting system was used without another deputy’s knowledge or consent, said the politician.

Expert: attack in Spain shows how terrorists switched to more easily reachable targets

Terrorist attacks that transpired in Spain this week shows how terrorists have switched to more easily reachable targets, where security requirements are not as strict, says Latvian National Defence Academy’s Security and Strategic Research Centre researcher Martins Hirss.

New mandatory tests in schools to be introduced four years from now

In four years’ time – 2021/2022 school year – it is planned to introduce completely new mandatory tests in schools, as reported by State Education Content Centre Director Guntars Catlaks.

Nearly 9,000 children and their parents got homes thanks to state support programme

In the first half-year of 2017, state support helped 1,527 families in Latvia to buy homes. Compared with last year, families’ demand for state support has grown 6%, as reported by Altum finance institute.

Prediction: Aseradens will likely take control over Unity

Economy Minister Arvils Aseradens will become the head of Unity, Betsafe bookmakers predict. The possibility of Aseradens becoming the head of the party is given 45% probability by Betsafe.

Provisional estimate for next year’s fiscal space in Latvia is EUR 60 million

Next year’s fiscal space has been estimated at EUR 60 million, as noted by Finance Minister Dana Reizniece-Ozola, adding that a more precise estimate will be available at the end of August.

Reconstruction of Vilnius airport runway concludes; aircraft return to Vilnius

On Thursday, 17 August, Vilnius airport’s runway was festively opened. This was the most massive reconstruction for the airport in the past 20 years. It was a unique project for Lithuania and all of Europe, airport representatives say.

Islamic State terrorist group takes responsibility for Barcelona attack

The recent terrorist attack in Barcelona, in which a shuttle bus rammed a crowd of people on La Rambla, killing 13 and injuring at least 100, has become this week’s topic.

Weather in Latvia to be warm but rainy on weekends

The sun will appear every now and then between clouds on Friday, 18 August. Still, some rain is expected, especially in the afternoon in Latvia’s eastern regions, where thunderstorms may appear. Rain is expected to reach the capital in the afternoon. Wind will draw in from the south. Air temperature will reach +21° C… +26° C, according to State Environment, Geology and Meteorology Centre.

Latvia’s export growth was moderately rapid in the first six months of 2017

Compared with the same period of 2016, Latvia experienced a moderately rapid export growth in the first six months of 2017, according to data published by Eurostat on Thursday, 17 August.

Latvia’s annual inflation in July was one of the highest in Europe

Inflation indexes in Latvia and the UK both reached 2.6% in July, which is one of the highest indexes in the European Union, according to data published by Eurostat on Thursday, 17 August.

Newest comments