bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Friday 24.01.2020 | Name days: Krišs, Eglons, Ksenija
LatviaLatvia

Economist: high rent prices in Riga contribute to emigration

FaceBook
Twitter
Draugiem
print
(+1 rating, 1 votes)

Citadele, Riga, rent, housing, housing fund, emigration, life in RigaThe high rent prices may be the reason why in spite of low unemployment levels and shortage of labour force people from Latvia’s regions depart to foreign countries, not Riga, says Citadele Bank’s economist Mārtiņš Āboliņš.

«This means the housing matter in the capital city and certain other cities may have become one of the narrowest places in Latvia’s economy,» says Āboliņš.

«Apartment rent prices in Riga may be one of the highest among all EU capital cities. This is the conclusion that comes from comparing rent prices, wages and living costs in Riga and other EU capital cities,» explains the economist.

Citadele Bank’s expert says Riga plays a much bigger role in Latvia’s economy than capital cities of other European countries. He reminds that more than half of Latvia’s residents live in Riga and they produce nearly 70% of GDP. The economist adds that IT technologies and other forms of business services rapidly develop in Riga, with average wage having exceeded EUR 1 1000 before taxes, GDP per capita is close to the average EU level, unemployment only at 3.7%, and companies suffer a shortage of employees, which is why there are more and more talks about attracting foreign labourers.

There are objective and major factors for domestic migration

Āboliņš says people from regions are more likely to leave the country than go live in Riga.

Data from the Central Statistical Bureau of Latvia shows that between 2016 and 2018 a total of 9 500 residents had moved from Latvia’s regions to the capital city, whereas the number of people who had left for foreign countries reaches 13 000.

Āboliņš explains that, considering birth and death rates, the number of people in Riga’s surrounding area has not changed, whereas the population outside Riga region has declined by more than 30 000.

«It is hard to believe people unable to find jobs in regions have sufficient skills to work elsewhere in Europe and not enough to find work in Riga,» comments the economist.

«This allows for the possibility that there are objective factors that prevent people from moving to Riga or any other economically active city. There are many reasons, but I believe the rent market in Riga and the situation on the housing market may be a notable factor,» says Āboliņš.

Emigration is the more economically rational decision

Āboliņš says it is cheaper to rent housing in Riga then it is in other capital cities. However, wages in Latvia are low but living costs are high.

«If we compare rent prices not with average wages but with free funds left after covering basic needs, it turns out rent prices in Riga are some of the highest in Europe,» explains the economist.

«Basically rent takes away all income of a family with two children after paying for basic needs. This means saving up for housing purchase is very difficult for residents,» says the economist.

«At the same time, rent of equal housing in one of Western Europe’s capital city would cost about half of residents’ income. This means a family of four is able to afford more long-lasting use products, travel, rent a bigger home and make savings,» says the bank’s expert.

He says such a situation present in Latvia’s economy means employers have a hard time filling vacant jobs the pay in which is below average in Riga, because unless a person owns housing in Riga or the employer is unable to provide housing, emigration becomes a more economically rational decision.

The economist reminds that the expensive nature of the housing market is a global phenomenon that is contributed to by urbanization and the effect that economic activity is largely concentrated in capital cities. This is no exception for Latvia – over the past 30 years the population in the country has declined, whereas the population around Riga has remained stable for five years.

More organized legislation would stimulate construction of new housing

«Wages in Latvia continue growing, construction volumes will change in the next decade, as will demand to housing, because very low birth rates in the 90s has caused the reduction of new families,» predicts Āboliņš.

«Nevertheless, migration flow towards Riga will likely continue, and after decades the apartment homes built during the Soviet era will be 60 – 70 years old. Unfortunately, nowadays we do not invest in this fund’s renovation, nor are we actively building new homes to replace old ones,» the expert predicts.

He also notes there are no quick and simple solutions to combat this problem. Nevertheless, the state may become involved by adopting a new law on rent to improve construction processes, and more actively contribute to renovation of the housing fund. It is also necessary to think about the state’s more active involvement in construction of housing.

«Lasting and unpredictable construction process increases costs, whereas flaws with legislation do not motivate the private sector to cooperate,» reminds Āboliņš.

The economist admits a more organized legislation would stimulate construction of new housing. Nevertheless, it is also necessary to think about attraction of investments to help restore the existing housing fund. EU funds have made heating more accessible. However, Riga does not use this tool often. This is because there is fractured structure of housing owners and the complicated decision-making process.

«The established management model has not been able to resolve the matter of housing renovation. This is why the state should consider a more active approach, such as transitioning from an opt-in approach for at least standard projects to opt-out for projects in which renovation is compulsory and automatic unless owners decide to reject it,» explains Āboliņš.

The economist also proposes considering a more active involvement of the state or municipalities in the construction of the residential fund. Specific examples show this is possible, and the economist is confident it is possible to find solutions, considering the programme is outside the state budget and does not affect funding for other industries.


Leave a reply

  1. From Abroad says:

    And the ruling elites say we need to import immigrants from third world countries (primarily Ukraine) to fill in these staff shortages. Where on earth are they going to live?

    • Guest says:

      A country can not need more workers, companies might need extra workers. What most of the world (outside EU) does is to give temporary work permits to skilled workers, and when work is done; they will return home (or go work somewhere else)

      • From Abroad says:

        The practice in developed countries has shown that there’s nothing more permanent than “temporary” workers.

  2. Psy says:

    Nicely written and partly true, in Riga there are more immigrants and then again they live somewhere, right?

  3. Bob says:

    Finally a true article about the “shortage of skills” (shortage of jobs paying enough, that is)

  4. Krotow says:

    Honest conclusion about real housing situation in Latvia. Living in Riga is expensive even when you’re renting a miserable flat in Soviet era building. Rent in new project buildings is exorbitant and not for average folk’s income. Most paying jobs in Latvia also are concentrated inside Riga or at city limits so anyone who works there still need a living place somewhere in Riga or nearby. Living in other cities in Latvia is cheaper, however there are not much to do. So no surprise why average folk decide to flee away to western Europe where he can earn at least enough to pay bills and still have something left.

    • Arthur says:

      If I had to choose either to work at supermarket or go abroad. More likely that I would go abroad. Government is eating most of my income! Social insurance, Personal income tax and valua added tax combined eats more than 60‰ percent of my income!
      Others who buys alcohol and fuel are even worse off.
      Meanwhile companies spend less money on Taxes. Black hat guys pays likely under 10% in tax.
      I would suggest to cut budget drastically, run schools primarily online, use eink displays split shifts to two per day in order to

      • Plus says:

        minimize hardware costs. Since most stuff would be on internet we would need much less teachers. Supermarkets could reduce packing and provide ingredients online straight to customers house preferably by using low CO2 transport like electric rail or electric cargo bike, also using logistics. We should support OpenSource software – could even open nonprofit for this. Actual improvements in software could be done more somewhere like in Bangladesh for instance. So we could do more for less!
        Other things we would need to encourage would be to…

Linkaits: banks once again service Ventspils Freeport terminals

The situation with Ventspils Freeport is gradually becoming more relaxed. On top of that, banks once again service port terminals there, as Latvian Transport Minister Tālis Linkaits affirmed in a conversation with journalists on Thursday, 23 January.

Aivars Lembergs picks ex-prime minister’s freelance advisor Grudulis as his lawyer for debates

The suspended Mayor of Ventspils Aivars Lembergs, who is also accused of committing serious crimes and is under US sanctions, has picked once the prime minister of Latvia Māris Kučinskis’ freelance advisor Māris Grudulis as his lawyer for debates in court, as was announced in court on Thursday, 23 January.

What is Lithuanian President’s main reason to skip Jerusalem Holocaust forum?

Lithuanian President Gitanas Nausėda has unexpectedly flip-flopped on where and how to commemorate the 75th anniversary of the liberation of Auschwitz-Birkenau death camp in Poland. First, he said he will attend the commemoration in Jerusalem, but then changed his mind to pay homage to the Jewish victims in Auschwitz, in Poland. The reason? Well, there is no clear official reason for that – President’s Office did not provide one.

Audit: Rail Baltica slowed by poor risk management and slow progress with municipalities

Delays and cost increase of Rail Baltica project is heavily affected by no risk management and no strategy, as well as slow progress in cooperation with municipalities and passive alienation of properties, Latvian State Audit concluded in its latest report.

China stops public transport in two cities over coronavirus

In China, a new strain of coronavirus has claimed the lives of 17 people. To keep it form spreading, local authorities have stopped the public transport to and from the cities of Wuhan and Huanggang.

BNN investigation | Rebenoks and Krieķis may have plans to return to Olainfarm board despite ties to serious crimes

Ex-Olainfarm officials Mārtiņš Krieķis and Pāvels Rebenoks, the latter also serving as Latvian Economy Minister Ralfs Nemiro’s advisor, may return to the company’s board to, possibly, continue walking «well-travelled path» paved with non-transparent deals, according to information available to BNN.

In Estonia, forgetting to register child’s name can lead to municipality choosing it

Estonian law obliges parents to register the name of their child in a month’s time after giving birth. In the unlikely case of them being late, the law opens right to a local municipality to choose it.

Lukashenko: Belarus needs to diversify its oil imports, introducing Baltic supplies

As Minsk and Moscow are in talks to solve a dispute over the continuation of oil imports from Russia, Belarusian President Alexander Lukashenko has said that Russian supplies could be cut to 30-40% of Belarus’ total imports.

Minister does not exclude possibility of number of municipalities in Latvia increasing

The Administrative Territorial Reform offers reducing the number of municipalities to 39 in Latvia. Still, it is possible there may be one or two more, said Latvian Environment Protection and Regional Development Minister Juris Pūce in an interview to LTV programme Rīta Panorāma on Thursday, 23 January.

Thirteen people die from influenza in Latvia

Three people died from influenza in Latvia last week, increasing the number of victims to 13 for this year’s flu season, according to monitoring data of acute upper respiratory tract infections published by Disease Prevention and Control Centre.

Lithuania tries to halt haulage firm exodus to Poland with new tax

Lithuania is introducing a new «exit tax» to keep road haulage firms from relocating to other European Union member states. The firms say that other ways of moving business abroad will be used.

Corruption fighters: corruption perception indexes decline in Latvia in 2019

Latvia’s positions had worsened slightly in 2019 in global anti-corruption coalition Transparency International composed Corruption Perception Index.

UK parliament passes draft Brexit law

In London, the draft law on the withdrawal of the United Kingdom from the European Union has been finally passed by the Houses of Parliament after years of inability of British legislators to decide on their preferred way out of the bloc.

Harmony prepared to approve Riga’s 2020 budget after Burovs’ dismissal

Political party Harmony will not approve Riga municipality’s 2020 budget while Oļegs Burovs remains in charge of the city council, as reported by the be faction’s head Maksims Tolstojs.

British landlords support cards showing rights of EU guest workers after Brexit

After Brexit, which is due to start with February, European Union citizens will have to prove their settled status when looking for flats. Private landlords has supported a change in the Brexit law for EU citizens to have physical cards to prove it.

Survey: 86% believe roads should be among state budget priorities in Latvia

A total of 86% Latvian residents believe maintenance and repair work of roads should be among state budget priorities, according to results of a survey by SKDS.

Vitenbergs: every investment is vital for Latvia’s national economy

Investments are the foundation for a free market economy and every investment is vital for Latvia’s national economy, said chairman of Saeima’s Economic, Agricultural, Environmental and Regional Policy Committee Jānis Vitenbergs.

Kaljulaid in Antarctica: We enable Estonians to work online from anywhere

Visiting Antarctica, Estonian President Kersti Kaljulaid intends to do her daily work demonstrating the geographical flexibility working online can give. The head of state also pointed to the alarming speed of climate change visible in the far south.

Producer price level in Latvia’s industry declines 1.1% in December

In December 2019 the level of producer prices in the Latvian industry has reduced by 0.4 %. The level of prices of products sold on the domestic market has dropped by 0.2 %, and prices of exported products by – 0.6 %.

Moneyval report: Latvia has generally completed issued recommendations

Moneyval Committee of Experts on the Evaluation of Money Laundering and Terrorist Financing Measures of the Council of Europe has upgraded its report regarding Latvia completing the 11 recommendations it was previously presented, according to published information.

Russian energy advantage in Baltics should be stopped, says Energy Commissioner

Baltic power producers are subjected to European Union’s emissions tax, while Russian and Belarusian producers are not despite all competing on the Baltic market. Energy Commissioner Kadri Simson believes that this should be solved.

Employee reduction at Latvian Railway started at the end of 2019

Latvian Railway had commenced reassessment of its functions and operations in the second half of 2019. This is why the reduction of the number of employees commenced gradually at the end of 2019, as reported by LDz representative Ella Pētermane.

Those with voting rights are slow to sign referendum for municipal election regulations

Between 16 and 21 January, a total of 1 137 people with voting rights cast their votes in favour of the referendum intended to introduce changes to regulations that govern snap municipal elections, as reported by Latvian Central Election Commission representative Laura Zaharova.

Video: Thunberg and Trump clash over climate in Davos

«Our emissions have to stop» versus «import our oil and natural gas» – these were the conflicting calls from Swedish climate activist Greta Thunberg and U.S. President Donald Trump in the World Economic Forum.

Kariņš: the minister should not ease requirements for State Police chief candidates to appoint someone specific

Easing requirements for candidates wishing to become chief of State Police is unacceptable, and such behaviour creates suspicions that something is wrong with the process, said Latvian Prime Minister Krišjānis Kariņš in an interview to LTV programme Rīta Panorāma on Wednesday, 22 January.


Do NOT follow this link or you will be banned from the site!