17/8/0
A rising economy, record-low bank interest rates, the development of affordable mortgage lending, and growth in the purchasing power of the population – all of this could not but lead to an increase in demand for housing. At first, supply was unable to saturate the market, so prices began to rise rapidly. However, this also attracted both new developers and new capital to the market, as well as speculators, whose activities largely determined market activity in the last two to three years. The volume of new housing construction increased significantly, and the reconstruction of elite houses and apartments in the center of Riga and the resort town of Jurmala began. Gradually, demand for real estate began to rise in other cities of Latvia as well.
Elite and Standard Riga
According to market research of Latvian real estate, housing in the capital of Latvia continues to become more expensive, despite predictions by some analysts of a possible market 'overheating' and price collapse. If in March of last year a square meter in a new building in the center of Riga cost €885, then in November it was already €3,220. And yet three or four years ago, when new construction was just gaining momentum, a 'square meter' in a new building could be bought for $500. By the way, on the new classifieds portal http://mm.lv you can check the current prices at which real estate is sold in the country today.
In almost all neighborhoods, the cost of standard apartments has increased several times. For example, in 1998, buying a three-room apartment in the Krasta Massif neighborhood would have cost the buyer only $6,000–7,000, but now its cost is about €70,000. New and exclusive housing has become sharply more expensive. In the Riga and other regions of Latvia, prices are rising more slowly, although over the past year they have risen significantly in Liepaja, Jelgava, Valmiera, Daugavpils. In the near future, a price jump for apartments and houses along the entire coast of the Gulf of Riga and the Baltic Sea is possible.
The recently restored Old Town in the center of Riga, with the Dome Cathedral, St. Jacob's Church, and other architectural monuments, attracts both city residents and visitors. It is precisely real estate in Old Riga, in the 'quiet center' and the so-called 'Noble Nest' district – both new and after reconstruction – that enjoys stable demand among wealthy buyers, both local and foreign. Given the fact that the construction of new houses in the historical part of the city is very limited, prices for this real estate are breaking all records. However, price growth in the Old Town remains the lowest – on average only 2.3% per six months. Reason: the already sufficiently high cost of housing, as well as demand that has already been largely satisfied.
The leader in apartment prices has become a new project on Palasta Street, where for a square meter with partial finishing you will have to pay about €7,000. If in the Old Town and the 'quiet center' areas, the main share of elite apartment supply comes from secondary housing and reconstruction, then in Jurmala and Mezaparks – from primary housing. This is quite natural, since the appearance of new projects in the Old Town is constrained by the high density of existing development and a number of restrictions. At the same time, in Jurmala and Mezaparks, the supply of elite secondary and reconstructed housing is limited due to the development of an unconditional competitor, an alternative sector – private houses. The average cost of elite apartments on the primary market in June 2006 was €3,420 per sq. m, and in December – €3,800.
The status of the most expensive district of Riga due to its elite location and exclusive supply belongs to Mezaparks. Developed infrastructure, proximity to the center, convenient transport links, the presence of a park area – all of this affects the cost of housing. On average, in new apartment building projects in Mezaparks, it rose from €880 per sq. m in February 2004 to €3,720 per sq. m in February 2007.
An analysis of price dynamics in December 2006 – February 2007 shows that the noted trend of moderate growth in apartment prices continues. The highest minimum, maximum, and average prices are traditionally observed in the center of Riga, Mezaparks, and Jurmala, where the rate of their growth has not exceeded 1–2% per month for a long time. At the same time, in the period under review, the average cost of elite housing in the center of the capital increased from €4,200 to €7,920 per sq. m, and in Jurmala – to €6,960 per sq. m. As for prices for standard apartments, in March of this year it was €1,713 per sq. m (an increase of 4% compared to February).
On the shore, it's so crowded, lively...
Of course, real estate on the Riga seaside is what primarily attracts the attention of potential buyers. It is not for nothing that in Soviet times the creative intelligentsia loved to relax here, attracted by the mild, comfortable weather, healthy sea air, and European service. Dzintari, Bulduri, Maiori, Dubulti, Pumpuri (districts united under the common name Jurmala) — an ideal place for recreation, and now also for particularly expensive and exclusive real estate.
Its cost in Jurmala is constantly growing, albeit at different rates. So, if in February 2004 the average price was €1,010 per sq. m, then in February 2005 it was already €1,710, in February 2006 – €3,050, and in February of this year – €3,490. The cost of middle-class mansions with land (a plot of 1,500 sq. m, a house of 150–200 sq. m) remains at the level of €255,000–300,000. And it is this category of houses that enjoys the greatest demand among buyers.
Currently, price increases continue only in places where supply is low and predominantly elite housing with original architecture and good layouts is offered for sale. Often such mansions are located on the banks of a river or lake. There are enough of them in the direction of Ķekava, Mārupe, Ādaži. Cottages of various designs and with different levels of finishing, with an area of over 200 sq. m, are increasingly coming onto the market. The cost of such villas and mansions varies around €1.5-3 million.
A dacha in the resort town of Jūrmala can also be rented, with demand typically rising in early July and August. This is primarily due to the fact that popular festivals and song competitions are held on the stage of the Dzintari Concert Hall at this time. And while in the district of Melluži the monthly rent for a house starts at 1,000-2,000 lats, in Dzintari and Majori it starts at €6,000-7,000 (the difference in currencies is explained by the fact that foreigners have taken a liking to the center of Jūrmala).
Jūrmala is gradually being built up with new mansions and houses, including apartment buildings. An example is the residential complex projects 'Jūras Pils' and 'Dzintaru Rezidence', located near the Dzintari Concert Hall. Prices here range from €2,800 to €3,000 per sq. m. In April of this year, the creation of four more large projects in Jūrmala was announced (the total number of apartments in them will reach 1,250). It is assumed that these are not exclusive apartments but middle-class ones.
In March of this year, interest in land plots of 1,500 sq. m within 50 km of Riga increased noticeably, at an average price of up to €50,000. The cost of land in the resort town of Jūrmala is sky-high, but demand for apartments and other real estate exceeds supply. This in turn pushes local government and developers to seek new territories for construction. As a result, the banks of the Lielupe River have come into focus. And if previously everyone sought to build exclusively near the sea, now developers have begun looking at the banks of the Lielupe, especially since land there is much cheaper than in other parts of Jūrmala. The proximity of the properties to the protected Natura 2000 area – a complex of specially protected natural sites recognized at the EU level – will undoubtedly raise the status of the real estate being built.
So far, work is only underway on two projects. The three-story apartment complex Summertime (being implemented by the company Speks-A) is actively being built. The second residential complex, Jauna Jūrmala, is planned by the Estonian developer Manutent, with an estimated total project cost of €60 million.
Laws, rates, restrictions
Latvian legislation is generally favorable to citizens of other countries purchasing real estate. The country's laws allow foreigners to buy real estate and land without almost any restrictions, as well as to rent it out. However, it is necessary to know about some nuances.
Firstly, Latvia has certain restrictions on purchasing land as property. Thus, a non-resident of the country cannot acquire ownership rights to:
* land located in state border zones;
* land on the coast of the Gulf of Riga and in the dune zone of the Baltic Sea;
* other land in the buffer zone of public water bodies and rivers, except for cases where redevelopment is provided for in accordance with the city development plan;
* agricultural and forestry land according to city development plans.
Secondly, according to the Civil Law of the Republic of Latvia, contracts for purchase, exchange, donation, and other agreements on acquiring ownership rights to real estate must be concluded in writing. Oral agreements in such cases are invalid. Only a notarized purchase agreement is suitable for registering ownership rights in the Land Book.
Thirdly, real estate transactions are not currently subject to personal income tax. Income tax on such transactions is levied only in the case of resale of the property within one year of ownership. The year is counted from the moment of registration of the property in the Land Book. Thus, the state is trying to combat speculative transactions.
Unlike many other countries, Latvia allows foreigners to purchase real estate of historical value. But you need to know that it will not be possible to demolish or even rebuild it at will – the state specifies in detail for what purposes and how it can be used. The same rule applies to a number of houses in the capital's center.
Real estate on the shore of a water body, be it a lake or a pond, and especially the sea, is a coveted item for wealthy buyers. The main law regulating private property relations in Latvia is the Civil Law of 1937, which was fully reinstated and remains in force. Within the framework of this law, water easements also operate. An easement is a partial restriction on the right of someone else's private property. Regarding water bodies, this is, for example, a water intake easement.
There are also two main special laws regulating the legal regime of water bodies: the Law 'On Protective Belts' and the Law 'On Fishing'. The first, as its name suggests, establishes the size of protective belts on the seacoast, as well as the coasts of Latvian rivers and lakes. The meaning of the protective belt stems from its name – it protects water resources. The standard size of the belt for water bodies with an area up to 10 hectares is at least 10 m wide. For the seacoast, it must be at least 20 m. Article 36 of the Law 'On Protective Belts' states that it is forbidden to restrict pedestrian access to the sea with fences, as well as to impede their free movement and presence on the beach and in the mooring strip.
In Latvia, there is a well-developed system of affordable mortgage lending. Statistics show that mortgage rates for foreigners in the country are higher than for residents, but still lower than in our country. For example, a Latvian resident can buy an apartment in a new building starting at 0.7-1.1%, plus EURIBOR, LIBOR, RIGIBOR. A foreigner can be granted a loan with a bank margin of 6%. The loan amount can be up to 90% of the property value, and the term up to 25 years.
The standard set of documents includes an income certificate and a property appraisal certificate obtained from a bank-recommended appraiser. The list of documents required for a loan should be clarified with the chosen bank, as the bank may request additional documents.
It should be noted that the Latvian banking system since the mid-1990s has been very attractive for citizens wishing to place savings abroad. There are several reasons for this. First, the Latvian banking system offered very favorable terms for non-residents. Second, they did not overly inquire about the origin of funds. Moreover, many people in Latvia speak Russian. Even the tightening of requirements for banks in 2004 to prevent money laundering did not significantly change the situation.
The procedure for buying and registering property is simple and not burdensome. Processing the necessary documents, provided that all documents are in order and the property is free of encumbrances, takes 4-8 weeks from the date of signing the contract. All property is entered into a single register, the 'Land Register,' which ensures high reliability of transactions.
Main costs in the process:
* cost of the acquired property;
* cost of property appraisal (depends on the appraised object, from €150);
* cost of insurance policy according to bank terms (if necessary);
* cost of loan processing and account opening (according to the bank's approved tariffs).
When purchasing property, several state fees must be paid, including the state fee (registration of ownership rights in the Land Register - 2% of the transaction amount and registration of mortgage in the Land Register - 0.1% of the loan amount), and the office fee (registration of ownership rights and mortgage in the Land Register). Notary costs (depending on the documents being executed) start at €150.
Although the Latvian real estate market is quite civilized, it is still better to purchase property through a well-established real estate firm. It is desirable that it has the appropriate certificate, as Latvian legislation does not strictly regulate this issue.
Foreigners owning property in Latvia do not need an invitation to apply for a visa. Instead, they can present the original extract from the Land Register confirming ownership. However, it must be remembered that property ownership is not a basis for obtaining a residence permit.
To purchase property in Latvia means to become the owner of real estate in one of the European Union countries, located in a strategically advantageous place on the Baltic Sea. This issue is relevant due to Latvia's imminent entry into the Schengen Area, which will allow citizens and long-term visa holders to travel within the EU without any restrictions.
Investments in Latvian real estate are currently among the most liquid: property in the republic is constantly rising in price. By the most conservative estimates, the potential for price growth is quite high, amounting to around 30% per year. In addition, investors are attracted by the favorable mortgage lending conditions, where 6% per annum is normal. Moreover, Latvia's legislative framework meets European standards, which eliminates the possibility of fraud in the market.