Since 2020, powerful global factors have influenced the Latvian real estate market. First came the pandemic, but as we know, it did not cause price drops or panic.
Then came the events of February 2022, which led to a ban on residence permit issuance for Russian and Belarusian citizens, a shortage in construction materials, disruption of logistics chains, and the cessation of certain import and export sectors. How does this affect the real estate market? We invite you to review the opinion of the Co-Chair of the Credit Committee of the Latvian Financial Association.
- Of course, from an emotional perspective, it is difficult for everyone. But if we look at the data, Latvia has a very low credit burden on its population. Latvian families are repaying loans ahead of schedule. This is fundamentally different from what we saw in 2006-2007. Young families take out mortgages for 20-30 years (to reduce monthly payments), but they repay faster (on average, in 12 years).
- As for the severing of economic ties with Russia, this affects certain business sectors. But more significantly, it impacts energy costs. One of the most important factors when choosing property is the cost of utilities.
- Inflation is a concern, but it will have minimal impact on interest rates. European regulators will raise credit rates, but this will happen gradually.
- Given high inflation, real estate remains an excellent option for saving money. Inflation indicators in Latvia could reach 10%. We can add that a rental apartment can generate annual income of 6-8%.
- There are several factors that positively influence the Latvian real estate market. Population incomes are growing, and lending volumes are very moderate. Compared to other countries (for example, Estonia), real estate prices in Latvia are much lower. The number of refugees from Ukraine is also significant, and this represents potential for rental housing.
We can conclude that there is no reason for financial crisis or concern.
Our company KOM-INVEST has helped complete several transactions in recent months, including cases where local families obtained mortgage loans. Banks are financing quality housing as before, and no negative trends are observed.
As an example, we can point to the area in Riga's suburb - Marupe. Last summer, a townhouse of 170 sq.m. was sold for 180,000 euros. In May of this year, a similar townhouse was sold for 205,000 euros. In both cases, buyers made a large down payment and took out a 20-year loan with approximately 500 euros monthly payment. If there are two working people in the family, this is quite a reasonable sum.
Source: https://www.varianti.lv/ru/blog/detail/article/7703
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