Forest Land in Latvia: A Magnet for Investors Despite Falling Prices – May 2023 Update

Forest land in Latvia was and still is one of the magnets that attracts both foreign and domestic investors, especially if their prices are significantly lower compared to Scandinavian countries

Although the situation in 2023 is no longer the same as in the fall of 2022, when wood prices were very high and, therefore, the prices of forest properties, investors’ interest in purchasing such assets has by no means decreased, although some potential sellers are not ready to withdraw yet from the price level experienced last year.

Falling prices are not good for sellers

“The current situation is unique, because there is a great desire for sellers of forest properties to sell them at last year’s price level, while buyers are in no hurry to make decisions,” Sandijs Lūkins, head of the sales department of SIA Latio Mežu, explains the situation. He recalls that since 2018, a pronounced sellers’ market has dominated, largely dictating the rules of the game, as there was a strong demand from various categories of buyers, including long-term investment funds. “Of course, it is not the situation of 2009, when the buyers dictated their conditions to the sellers of forest land, but there is a tendency for these balances to even out,” answers S. Lukin when asked when the buyer’s market time was expressed. According to him, the current moment can be considered as a kind of time of change. “Many potential sellers of forest land are currently not emotionally ready to sell their property at the price that potential buyers are willing to pay. Firstly, last year’s property prices were affected by very high timber prices, secondly by strong demand from long-term investors. In both cases, changes can be observed not only due to the drop in demand for timber, but also due to the overall macroeconomics, namely interest rate changes,” answers S. Lukins to the question about the uniqueness of the moment of change. He points out that, in a sense, in the current situation, potential sellers want to act in a similar way as during the recession – 2009-2010. year, although currently the price drop is far from what it was 13-14 years ago. “Land and property prices in Latvia are still lower than in Finland, Sweden or Estonia, and investors from these and other countries are logically interested in the future purchase of forest properties,” says S. Lūkins.

Read the whole article May 30 in Dienas Bizness magazine!

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