Latio: Index of average apartment prices in Riga unchanged in February
01 March 2010
Riga
Real estate company Latio has not noted any changes in the apartment price index in February. The average apartment price in Riga has remained at the previous month’s level of 550 EUR/sq. m., shows the Latio market report.
The average price of apartments in good technical condition in outer districts such as Purvciems, Pļavnieki and Zolitūde for one-bedroom apartments is 20,000–29,000 EUR;for two-bedroom apartments: 28,000–34,000 EUR;for three-bedroom apartments: 35,000–44,000 EUR;and for four-bedroom apartments: 40,000–52,000 EUR. In farther districts, such as Vecmīlgrāvis and Bolderājs, the prices are lower by an average of 30%.
The offer is limited. Buyers still wish to find properties at the lowest prices of the summer, while sellers are not putting up offers at these prices anymore, and usually do not agree to lower their prices anymore, as they believe that the price decline has come to an end. This, in turn, does not satisfy buyers, as they lack sufficient funds. Buyers refuse to involve banks and take a loan for the missing amount, as they are not confident in being able to keep their job or maintain their currently salary. Transactions without using a loan are mostly carried out for amounts up to 20,000 EUR.
Due to the insufficient offer, buyers are more frequently turning to real estate experts, who can offer properties not available at public portals, as well as provide consultations on the best investments and legal issues.
“Although prices have increased compared to last summer, apartments still make an attractive investment for future capital gains,” notes Latio market analyst Māris Grīnbergs.
The market is seeing an influx of sellers with large utility debts. According to bank observations, utilities are the first payments that people discontinue – before loan payments. The number of cases of changing apartments due to large utility debts is increasing. After moving to a smaller apartment, the difference is used to cover the utility debt.
Some interest was observed in February in completed, furnished apartments in new buildings. However, real estate experts note that this is mainly gathering of information, rather than a concrete intention to actually purchase an apartment. Mostly it is interest in rental opportunities with a possibility of purchasing the rented apartment at some point in the future.
In the segment of private houses and land lots, February was not an active month in either demand or offer, with the only exception being truly low-priced lots. Market participants have postponed their activities to the spring, when the snow will have melted.
On the loan market, the EURIBOR 6-month interest rates have reached their lowest historical level: 0.96%. The 6-month indicator of the Latvian lats interest rate index RIGIBOR has fallen from almost 28% in the June of last year to 4% at the end of February 2010.
In February, international credit rating agency Standard &Poor’s has upgraded its outlook on Latvia from negative to stable. This is a positive sign for the financial market, and demonstrates that the risks have decreased, which could result in an influx of investments, as well as in increased lending.
“If we are to believe the government forecasts that this year will see the lowest point in the economy, then all conditions are favorable for real estate investments,” points out Māris Grīnbergs.
