According to the real estate agents Ober Haus' figures, the average price of apartments in Riga rose by 0.85% during the year to February 2016, to €1,063 (US$ 1,208) per square metre (sq. m.), the fourth consecutive month of annual price hike. When adjusted for inflation, prices rose by 1.33%.
Although their figures are based on different transactions, Arco Real Estate's figures show a similar trend, with apartment prices in Riga rising by 3.9% (4.4% in real terms) to €664 (US$ 755) per sq. m. during the year to February 2016 - in this case, the fourth consecutive month with annual house price rises above 2%, following a few months of slower growth.
Ober Haus tends to deal in high-end city-centre housing, while Arco deals in the estates.
At the end of 2015, prices of new apartments in Riga's city centre and the Old Town ranged from €2,100 (US$ 2,387) to €4,000 (US$ 4,547) per sq. m., according to Ober Haus. Exclusive projects can cost to around €6,000 (US$ 6,820) per sq. m, while new projects in the suburbs can be sold from €1,200 (US$ 1,364) to €1,750 (US$ 1,989) per sq. m.
Among estates, the most expensive was the Teika housing estate, with an average apartment price of €828 (US$ 941) per sq. m., followed by Zolitūde at €723 (US$ 822) per sq. m., Agenskalns at €718 (US$ 816) per sq. m., and Purvciems at €713 (US$ 810) per sq. m. Bolderāja had the lowest average apartment price of around €469 (US$ 533) per sq. m., according to Arco.
On these estates one-room and two-room apartments had the most significant price rises during the year to February 2016, according to Arco.
- The average price of one-room apartment rose by 5.4% to €738 (US$ 839) per sq. m. during the year to February 2016.
- Two-room apartments were up by 5.6% y-o-y to €681 (US$ 774) per sq. m.
- Three-room apartments cost €631 (US$ 717) per sq. m., up by 3.1% y-o-y.
- Four-room apartments rose by 1.7% y-o-y to €607 (US$ 690) per sq. m.
The average euro-denominated housing loan interest rate was about 3.58% in January 2016. For US dollar-denominated loans it was 3.55%.
Despite low interest rates, mortgage lending for housing continues to decline. Loans for house purchases fell by 4.4% to € 4.5 billion (US$ 5.1 billion) during the year to February 2016, according to the Bank of Latvia.
Foreigners get a five-year residence permit in Latvia if they buy residential real estate, under Immigration Law amendments implemented on July 1, 2010. The conditions were then (according to Baltic Legal):
- The transaction should exceed €142,000 (US$ 161,355) in Riga or Jurmala, or €71,000 (US$ 80,677) in other regions;
- Only non-cash funds may be used to buy real estate;
- The buyer must not have any real estate tax arrears in Latvia (and must never have had such arrears);
- Transaction concluded after July 1 2010.
In September 2014, Immigration Law amendments increased the threshold for obtaining a residence permit and introduced other conditions and costs, if a foreigner's real estate was registered in the Land Register after September 1, 2014:
- Minimum transaction value of real estate located anywhere in Latvia must be €250,000 (US$ 284,075).
- The total cadastral value of the property at the time of acquisition should be at least €80,000 (US$ 90,904).
- Payment of a state budget contribution worth 5% of the real estate's transaction value.
Analysis of Latvia Residential Property Market »
The suburbs of Riga included in our research are Purvciems, Teika, Mezaparks and Vecmilgravis. A 50-square metre (sq.m.) apartment in these areas costs around EUR 78,000 to buy, but could earn around EUR 343 monthly rental income. Property owners thus enjoy rental yields of 5.2%.
The property market´s recovery began in 2010 and accelerated in 2011, but since then the market has been much quieter.
Round trip transaction costs are low to moderate in Latvia. See our Property transaction costs analysis for Latvia and Property transaction costs in Latvia, compared to the rest of Europe
Capital Gains: Capital gains are taxed at a special rate of 15%.
Inheritance: There is no inheritance tax.
Residents: Residents are taxed on their worldwide income at a flat rate of 23%.
Rents: Rents can be freely agreed between landlord and tenant. Rent control exists only on denationalized buildings.
Tenant Security: Contracts for any period of time are possible, and terminate on the expiry of the term, without need for notice. If the tenant withdraws from the lease, he can in theory be made to pay the entire amount of the lease or rental payment.
The IMF has hailed Latvia’s cost-cutting efforts as a model for indebted eurozone countries. Latvia’s recovery 2011-14 has mainly been driven by exports and an improving business and investment climate. Exports grew by 33% in 2011.
On January 1, 2014, Latvia adopted the euro. The adoption of the euro was originally planned on January 1, 2008 but was delayed several times. Its adoption is a recognition of economic success. The currency adoption is expected to improve trade by lowering costs, and aid economic and financial integration between Latvia and other European Monetary Union (EMU) members. Before the currency adoption, Latvia’s old currency (Latvian Lats) was pegged to the euro at Ls 0.702804 = €1 in 2005.
In 2016, Latvia's economy is expected to grow by only 2.3%, due to the weak investment dynamic, the expected decline of the global economy, and the current geopolitical tension.
In February 2016 unemployment was 9.2%, according to the State Employment Agency. The lowest unemployment level was in the Riga region at 5.7%, while the Latgale region had the highest unemployment at 19.3%.
The country's consumer prices in March 2016 fell by 0.6% from the previous year, according to the Central Statistical Bureau of Latvia (CSB).
Latvia is currently working on becoming a member of the OECD. “To a certain extent, it (Latvia’s accession to the OECD) is a matter of prestige. Some of the key questions asked by investors are about whether it is geopolitically safe here, whether we have reduced corruption, and the OECD membership would partly be an answer to the investors that we are a trustworthy country, not some kind of a banana republic,” said Finance Minister Dana Reizniece-Ozola.
Latvia has had a new prime minister, Māris Kučinskis from February 2016. PM Kučinskis took office after former PM Laimdota Straujuma resigned in December 2015, due to the infighting within the ruling coalition. PM Kučinskis is a member of the Union of Greens and Farmers, and Latvia's first prime minister not to be a member of the Unity Party since 2009.
Aside from PM Kučinskis, Latvia also elected Raimonds Vējonis as state president in June 2015. State President Vējonis is a member of the Green Party, which is a part of the Union of Greens and Farmers.
One of the biggest hurdles of the new government is the geopolitical tensions, due to Russia's aggressive action in seizing the Crimea in 2014. Estonia, Lithuania, and Latvia became wary of Russia's aggression, which prompted them to seek troop deployment to their nations from the North Atlantic Treaty Organization (NATO).
“An Allied presence is an essential prerequisite for Latvia’s security in a situation where Russia does not change its policies regarding the Ukraine conflict and, at the same time, strongly demonstrates its military presence and potential in the Baltic Sea region,” according to a statement from Latvia's Ministry of Defense.
NATO's former secretary-general Anders Fogh Rasmussen, warned the Baltic states in early 2015 that Putin may attack. “There is a high probability that he will intervene in the Baltics to test Nato’s Article 5... Putin knows that if he crosses the red line and attacks a Nato ally, he will be defeated. Let us be quite clear about that. But he is a specialist in hybrid warfare,” according to Rasmussen. Article 5 of NATO's charter states that a military attack on one member state is an attack on all of them.