Real Estate Transactions in Latvia – Spring 2021 Update

This year, spring is running slowly – not only in terms of the weather, but also in terms of real estate transactions. The expected boom in the number of transactions is still being held back by the high Euribor, forcing those who plan to attract bank financing not to hurry with the decision to purchase a property.

Thus, the most activity in the market is maintained by buyers with their own funds. More and more buyers are not shy about haggling over the price, and sellers are also becoming more flexible in this matter, the situation is partly reflected in Latio’s monthly “Confidence of Home Buyers” index: in April, the number of sellers asking for a price that is disproportionate to the market situation decreased to 49%.

“Home Buyer Confidence Index”* data for April:

In April, 1,180 apartments were available for purchase in the first-time market of new projects in Riga. Compared to the supply in February last year, the number of new homes has increased by more than 65%, which can be explained by the active construction of new projects, as well as the overall decrease in the number of transactions. Namely, a year ago, buyers “caught” apartments in the new projects relatively quickly, so the supply dropped significantly. On the other hand, in the conditions of the moment, it takes longer to make a decision on the purchase, and in addition, the construction of new projects continues, offering to reserve properties that are still under construction.

The average price of apartments on the first-time market is currently a little over 3,000 EUR/m². The greatest activity of sellers is noticeable in the secondary market. The number of objects available for purchase is increasing, especially in Riga micro-districts. About 1,800 serial apartments are available for purchase in the surroundings of Riga – the supply has increased by 46% since April last year. In the secondary market of new projects, the average housing price is approximately 1,960 EUR/m², but in serial buildings, the average transaction prices did not change significantly during the month, amounting to 1,025 EUR/m².

Latio’s real estate managers have observed a trend: under the influence of winter season bills, a large number of owners have decided to put their empty properties up for sale. Also, a large part of the current offer consists of houses whose owners do not live permanently in Latvia and in the current conditions are in a hurry to sell their empty properties, realizing that they will not return to live in Latvia. Therefore, there are a large number of empty apartments for sale in the vicinity of Riga, including those with a large area and unrenovated.

For example, in Vecmīlgrāvi, Ķengarag and Bolderāj, the price of unrenovated apartments is close to 600 EUR/m², while renovated ones – up to 1000 EUR/m². In the rental market, the supply has not increased so significantly: about 1,200 apartments are available, or 23% more, compared to the same period last year.

Location has always been an important factor in choosing a property, but in addition to that, the general technical condition of the building is taken into account more than ever. The energy efficiency of the object also plays an increasingly important role in the choice of real estate. Primarily, this aspect is important for younger buyers aged around 30-35, who are considering the possibility of buying a home with bank financing. At the same time, it should be recognized that the segment of buyers for whom energy efficiency is important is only about 10% – these are people whose financial capabilities allow to evaluate other factors, not only the price.

“According to Latio’s observations, the housing market is currently dominated by buyers with their own funds, but there are fewer buyers who plan to attract co-financing. Realizing their advantageous position, buyers who buy property at their own expense are ready to seriously bargain and try to get the best price, even lower than the current market price. A significant part of buyers still use their own or close people’s savings to buy real estate, thus reducing or avoiding the burden of credit. If the seller is ready to compromise a little in terms of price, then the deal is done,” says Roman Aleksandrovs, head of real estate transactions at Latio.

The supply is growing moderately, but the market still lacks quality properties at an adequate market price. Although it might seem that the offer in the secondary market segment is wide in terms of the number of objects, for those buyers who want to buy a good and high-quality housing in the secondary market, the options are very limited. There are few housing units that meet the requirements of buyers, moreover, often such objects are not even published on advertisement portals, narrowing the circle of potential buyers, therefore the only way to find potentially attractive properties is to turn to real estate specialists.

When it comes to housing with a larger area, such as three- and four-room apartments, demand is shrinking – mainly due to high property prices. This is characteristic of the renovated buildings of the center of Riga, as well as the new projects. Often, the most compact housing options are booked quickly, but the large apartments can wait for months for the new owner. In the secondary market of new projects in the center of Riga, the average property prices are 2450 EUR/ m² and half of the transactions are in the price range of 2000-3000 EUR/ m². Only 2% of apartments are bought at a price of 4000-5000 EUR/m².