Navigating the Real Estate Market Under Geopolitical Challenges and Inflation: Why the Role of Quality Agents is More Important Than Ever

Geopolitical challenges, inflation, the rise of the Euribor rate – the last two years have saturated the real estate market with events that we tend to experience in 10-year periods in times of peace. These events have a direct impact on the citizens’ wallets as well as on the opportunities to navigate the market in a qualitative way. In such conditions, real estate market agents play an important role, who in the current economic environment not only have to think about how to earn, but also strengthen the knowledge and skills of the population in dealing with real estate, or business acumen.

Part of the real estate market has always been about predictions. Unfortunately, the events of the past two years have put us in an environment where no one can afford to predict how we will live in a year, two or five. In such circumstances, it is especially important to evaluate the reasonableness of the transaction in the current economic environment, and those citizens who will collect the widest possible amount of quality information will be able to make sensible decisions – in this case, we can call it business acumen.

Why is the job of a quality agent becoming more important?

Gone are the days when an investment in almost any type of real estate came with relatively certain predictions of its profitability or substantial future appreciation. Currently, the market space must be evaluated much more scrupulously, and the need for comprehensive analysis and high-quality work of agents is greater than ever before.

If we talk about entrepreneurship, when thinking about buying a home, the main thing is to accurately determine your needs and financial capabilities, putting your desires in the background. This means that we must objectively calculate the amount of money that we are ready to spend on the purchase of a home, and what is important – also the price of money or co-financing. We see that the current offer of the industry in the context of both housing and loan prices forces people to think down to earth and more rationally, directing a larger part of the population to the secondary housing market, where the final price of the housing and the potential monthly loan payment are more in line with the “carrying capacity” of the payments of an ordinary citizen. Even in spite of the fact that in such a home you may have to live with higher heating bills during the heating season.

The role of real estate agents is growing in such uncertainty. At the moment, the agent must be able to assume not only the position of a seller in the consulting process, but also be able to represent the process from the perspective of an economist, a builder, a lawyer, and sometimes also a psychologist. Unfortunately, by advising honestly and openly, agents tend to deny themselves more opportunities for profit, but this is unfortunately part of the crust of the profession. Also, the resource offered by artificial intelligence in the real estate industry could strengthen the analytical side of the work, but it is unlikely to be able to properly take into account subjective things, such as the location of the property in the scenic environment and other emotional factors. When thinking about buying a home, do not deny yourself the advice of an agent, especially at such times when only those who devote considerable time and have a certain amount of experience can navigate the current socio-economic and market processes.

What are positive vectors?

In the first quarter of this year, the interest of residents in obtaining building permits for the construction of private houses grew by almost a fifth. This signal confirms that people have a desire to improve their quality of life even in economically challenging periods, besides, we Latvians are practical people, who in most cases will look for and choose the most economically advantageous way to realize the idea for their home. Taking into account that there are no more lands left, if this trend continues, an expected price increase in this segment cannot be ruled out.

If we compare the market situation with our neighboring countries, the availability of housing in Latvia is still at a much better level than in Lithuania and especially in Estonia. Prices in new projects in the center of Tallinn range from 4,500 – 6,000 euros per square meter, while new projects in the center of Riga cost 3,200 – 4,200 euros per square meter. It is clear that market prices must be correlated with the purchasing power of the local population, so we will watch with interest how price trends will continue to develop in all Baltic countries.