Latviski English По-русски
Monday 19.03.2018 | Name days: Jāzeps

Expert: Latvia’s real estate market is sick

(+1 rating, 1 votes)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn medical terms, Latvia’s real estate market is currently sick. It will only recover once all transactions are carried out using actual market price and those whose expectations are overestimated – drop out, said real estate specialist, member of Latvian Real Estate Association and board member of Real State Jurmala Igors Danilevics.

He notes that the state of the current real estate market is uncertain: whether or not it is a buyer’s or seller’s market. When setting prices, project owners do not always fully understand the requirements of the end consumer. Buyers, on the other hand, are often unable to find appropriate offers even though there are many on the market. He mentioned Jurmala, where a lot of apartments were built during the last real estate boom (there are around 700 apartments available there) without taking into consideration the actual needs of buyers.

«There is no need to artificially create anything,» – emphasized Danilevics. He added: «What’s the point of producing ten tons of potatoes if the market realization volume is only five tons? Even now construction takes place on such a large volume that it will not be possible to sell everything in the next five years. Although statistical data shows that our residents fall behind the average European housing volume index, it is important to keep in mind that many do not buy properties because of many different reasons. It does allow the rent market to develop. The grey sector’s dominance on the rent market, I believe, is because SRS puts all economic pieceworkers in the same bag, whereas residents fear too much bureaucracy.»

The expert points to the problem: houses that were built at the beginning of 2000 remain ownerless and have since become outdated. They now require investments to get them back into shape. Real estate companies of banks also have many objects with questionable value and uncertainty about their future. «I believe those properties will have to be admitted illiquid around 2018, and companies will have to make decisions to write them off as losses,» – said the expert.

«Transactions are currently being carried out with non-residents. The negative emotional atmosphere has disappeared. Now each client has their own story and reason for buying real estate in Latvia. Rational approach is noted more and more often: whether it is an investment for future renting of the property or and investment in a future home. Lately, however, the general attitude towards non-residents has changed: many restrictions have become insurmountable for eastern non-residents even with the cleanest biography and the biggest desire to buy. A situation has formed when we sit on our portfolios waiting for rich investors. How long will we keep waiting? What if the rich foreigner never comes?» – Danilevics rhetorically asks. Looking towards the future, the expert says he sees no reason to expect groups of investors lining up to buy real estate in Latvia at current prices.

«It is positive that we can now discuss the local buyers once again provided with mortgage loans. Unfortunately, there aren’t many such transactions. Lately the market has become somewhat active. This activity is ensured by interest rates – around 2.5% annually. The biggest proportion of transactions among local buyers is noticed in the group under EUR 100,000. We have noticed that local buyer predominantly prefer economic housing offers,» – Danilevics concluded.

The main components that currently influence the real estate market include taxes, legislation and crediting, said the expert. «One important moment is the review of the property tax. There is a rule that the State Land Service takes into account the value of the piece of property for the past three years when calculating cadastral value. However, we have noticed that the service does not keep up with market changes: it was either too slow and did not collect taxes when it could or the value level was established as high when it had actually declined. The single property matter is very important: I believe legislators should protect it,» – the expert explained.

He does not believe wages will grow significantly in Latvia in the next couple of years. He also does not expect groups of investors to come from foreign countries. «The current activity on the market is minimal. Does anyone really analyse the supply/demand situation? Perhaps this activity on the market is normal. I believe reality has finally set in as to what the situation on Latvia’s real estate market  should be, considering the size of the country, its population size, geographical location and economic situation,» – said the expert.


Leave a reply

NATO's defence spending benchmark met by three EU member states

Despite the current demanding security situation, in the NATO military alliance, no more than three member states of the European Union have reached the recommended defence spending sum in 2017 and Estonia is one of them.

In fight for northern Syria, Turkish-backed forces take city from Kurds

In the fight for northern Syria between forces led by Turkey and Kurdish fighters, Turkish-backed units had gained control of the heart of the Syrian-Kurdish city of Afrin.

Russian presidential election pronounced won by Putin

Russian President Vladimir Putin been announced as the winner of the Sunday, March 18, presidential election, as the politician has pledged to devote his new term in office to strengthen Russia’s defences against the West and to improve the quality of life.

Week in Lithuania. Some 5,000 gather in protest rally outside Lithuania's Parliament

Some 5,000 people gathered outside the Lithuanian parliament in Vilnius on Thursday, March 15, to express discontent with the failed parliamentary vote to impeach MP Mindaugas Bastys and the performance of the ruling Lithuanian Farmers and Greens Union.

BNN summary of the week: oligarch talks’ ownership; scandals in Lithuania; Estonia wants direct democracy

BNN offers a summary of this week’s topical news in a variety of categories: Progress; Scandals; Invitation; Fight; Opinion; Decline.

Remembrance day of Latvian Legionnaires passes with shouts and two arrests

The Legionnaires’ remembrance procession in Riga on Friday, 16 March, passed peacefully. Nevertheless, several conflicts did take place among differently-minded people near the Freedom Monument. Two individuals were arrested by police.

Influenza intensity in Latvia – moderate when compared to other European nations

A comparison of influenza activity in Europe shows that it is high or very high in several countries. Latvia’s influenza intensity is considered moderate, as noted by epidemiologist Raina Nikiforova.

Hourly labour costs in Latvia grew 7.3% in 2017

Compared to Q4 2016, in Q4 2017 hourly labour costs rose by 54 cents or 7.3 %, reaching EUR 8.02. Seasonally adjusted data show identical changes – rise of 7.3 %.

Rietumu Banka claims it has not worked with high-risk clients for years

Rietumu Banka has been steadily rejecting high-risk clients for years and has significantly reduced the volume of transactions, as mentioned by the bank’s representatives.

Lithuanian and Estonian businessmen are ahead of Latvia in terms of investments

In Latvia, 36% of small and medium-sized companies have plans to invest in the development of their business this year. In Estonia and Lithuania, on the other hand, the proportion of businesses with development plans is 42% and 46%, respectively, according to results of a recent study performed by SEB Bank.

Russia pledges maximum pressure on UK amid ex-spy poisoning row

Russian top diplomat in the UK has envisaged on Friday, March 16, that the Kremlin would use maximum pressure on London as Moscow insists it has not been involved in the poisoning of a former Russian-British double agent with a Russian-made chemical weapon, as has been found by British investigators.

Latvia’s ministry: Crimea’s annexation is illegal

18 March 2018 will mark four years since the Russian Federation violated Ukraine’s sovereignty and territorial integrity by annexing the Crimean Peninsula and causing military aggression in the country’s eastern region. With its actions the Russian Federation has violated international law and basic principles of international relation, says Latvia’s Foreign Affairs Ministry.

Building gas pipe to Finland, Estonia to organise works for EUR 135 million

Continuing the works on the Balticconnector gas pipeline between Estonia and Finland, the Estonian natural gas network company Elering has stated that around 135 million euros, including a 98-million-euro funding from the European Union, will be invested in the project.

Replacement of cash registers rejected by SRS would cost half a million euros

The State Revenue Service has declined 18,000 cash registers as unfitting for requirements established by the Cabinet of Ministers. Fixing the problems found in them would cost half a million euros, as reported by LNT News.

Latvian Anti-Nazi Committee presented with protest restrictions on 16 March

Administrative District Court has compiled a shortened ruling, in which it rejected Latvian Anti-Nazi Committee’s application and preserved the decision imposed by Riga City acting CEO on 13 March 2018 on establishing restrictions on the planned gathering and protest act for 16 March unchanged.

U.S. introduces Russian sanctions for election meddling and cyber-attacks

Washington has introduced sanctions against 19 Russian individuals and five entities blaming them for attempts to sway the 2016 U.S. election and perceived cyber-attacks.

Slovakian PM Fico replaced with fellow party member

Slovakian head of government Robert Fico has stepped down after the murder of a journalist shed light on corruption in Slovakia, prompting nationwide protests. The long-standing Prime Minister had offered to resign earlier this week if the ruling coalition was allowed to finish its term.

Weekends will be cold and sunny in Latvia; next week will have volatile weather

Starting with Sunday, 18 March, air temperature in Latvia will rise above zero in most of the country, as reported by State Environment, Geology and Meteorology Centre.

Lithuania’s ruling LFGU party remains unscathed by scandals

It seems that, for now, Lithuania‘s ruling Farmers and Green Union has been nearly damage-proof despite the lambasting.

Latvian Civic Alliance: non-government sector should aim towards cooperation

Latvian Civic Alliance has invited the management of Latvia’s Chamber of Commerce and Industry to meet to discuss ongoing cooperation between organizations representing the business sector and the NGO sector.

Saeima rejects National Alliance’s proposal to make 16 March an official remembrance day

Latvia’s Saeima has decided to reject the proposal submitted by the National Alliance on making 16 March an official remembrance day.

43.6% of Latvian households have difficulties with making ends meet

In 2017 the share of households admitting that pay for usual necessary expenses with difficulty or great difficulty constituted 43.6 %, which is 1.5 percentage points more than in 2016.

Saeima voices support for Rail Baltica project’s progression

On Thursday, 15 March, the Saeima made a decision to support Rail Baltica project’s progression. In its decision, the parliament invited Latvia’s Cabinet of Ministers to provide all the necessary support for the project’s successful realization to ensure the project is realized in accordance with established terms and does not lose funding or support from the European Union, as reported by Saeima’s press-service.

Fast snow shovelling linked to cardiac fatalities, Finnish study finds

In Finish doctoral study, it has been concluded that snow should be shovelled calmly, not provoking stress and increased adrenaline in human blood that could lead to cardiac arrest.

Riga’s mayor spent at least eight million euros of residents’ money to promote himself

Over the course of the past three years, at least EUR 8 million of residents’ money has been used to promote the image of the Mayor of Riga Nils Ušakovs. This money was used to buy media, employ young members of Harmony, and finance ‘in-house protestors’ and using social networks, as estimated by Re:Baltica research journalism center.

Newest comments