Latio: The average apartment price has increased by 2% in March, and by 12.4% during seven months
31 March 2010
Riga
The average apartment price in Riga has increased by 2% in March compared to February, reaching 562 euros per square meter, show the data of Latio’s market report.
In February, the average apartment price was 550 euros per square meter, unchanged from January. Since September 2009, when the average apartment price started rising again after having declined for two years and reaching 500 euros, it has grown by 12.4%.
“A very rapid increase of apartment prices has been achieved during seven months. The peculiarity of Latvia is its small market and the potential for quick change. In much larger markets, the recovery after price adjustments can take as long as ten years. Latvia can be compared to a small ship that, unlike a massive tanker, is maneuverable in the sea of economic change, and can get back on its way quicker,” points out Latio market analyst Māris Grīnbergs.
“The average apartment prices are increasing, because the offer meeting the requirements of the potential buyers is shrinking. During the past half year, the offer of smaller-sized and cheaper apartments has also fallen, because these properties are the ones that get purchased first upon the returning of activity in the real estate market. The number of transactions, however, has not increased and remains at the previous months’ level,” explains Vija Gailīte, head of Latio’s apartment and private house sale department.
In March it was possible to observe a quite steady and stable apartment price increase in all neighborhoods of Riga and in all types of apartment buildings. The largest average price increase in March was shown by one- and two-bedroom apartments in buildings of various types in Pļavnieki, Ziepniekkalns, Ķengarags, Sarkandaugava and Bolderājs. This is explained by larger demand for small apartments and the limited offer.
The prices of apartments in good technical condition in such popular neighborhoods as Purviems, Pļavnieki and Zolitūde were as follows: for one-bedroom apartments: 21,000–30,000 euros;for two-bedroom apartments: 29,000–37,000 euros;for three-bedroom apartments: 34,000–47,000 euros;for four-bedroom apartments: 39,000–54,000 euros. The prices of apartments in neighborhoods farther from the center of Riga, such as Vecmīlgrāvis and Bolderājs, are lower by 20–30% on average.
“In March, especially at the end of the month, the overall activity in the housing market has increased. Our clients wish to both sell and purchase properties. We often hear from people who are interested in purchasing housing that the offer of good apartments is limited,” says Gailīte.
Buyers wish to purchase high-quality apartments that allow moving in immediately and do not require renovation. Apartments that require renovation are currently not being purchased even at low prices. Buyers also do not show interest in renovated apartments offered at inadequately high prices.
Both in March and during the whole first quarter of 2010, the offer of apartments for sale has increased;however, some of these apartments, due to their bad condition or high price, do not satisfy the buyers’ requirements. Overall, the offer of good, high-quality apartments and houses is limited in all segments of housing. In March, compared to February, the offer of apartments priced from 25,000 to 75,000 euros has increased. This group mainly includes typical apartments. The offer of apartments priced up to 25,000 euros, as well as above 90,000 euros, has fallen.
All segments of the housing market exhibited a new trend in March – some of the potential buyers purchased the property with the use of a bank loan. It shows that people are again ready to use credit, as their opinion on the improvement of the economy is becoming more optimistic. The banks’ terms, however, are much stricter, and the loan granted for a housing purchase usually does not exceed 50% of the purchase amount.
“It can be predicted that foreclosed properties – both new projects and typical apartments – will be made available for purchase in the near future. Upon beginning the sale of these properties, banks will most likely also grant credits for housing purchases to stimulate this process. The offer might increase;however, thanks to the support of crediting, so will the demand – therefore, the apartment prices shouldn’t fall,” predicts Māris Grīnbergs.
Another characteristic trend of the whole housing market in March: buyers wish to have the price offered by the seller reduced by as much as 30%, as has become common during the past years, however sellers are willing to agree to a price reduction only in rare cases, and even then only slightly.
