Latio: Stable increase of new apartment prices seen over past two years
January 18, 2012
Riga
In contrast with standard project apartments in Riga, whose prices after the sharp decline were on the increase in the end of 2009 and in 2010 before stagnating, the segment of new apartments has displayed comparatively stable price growth over the past two years, according to the latest housing market review by Latio.
This is explained both by the relatively limited number of new apartments on offer and the pause in the construction of new residential buildings, as well as by the growing interest of foreign buyers in purchasing new apartments, particularly in downtown Riga and Old Riga.
The average price of apartments in the residential neighborhoods of Riga in Q4 2011 was EUR 1,160 per square meter, an increase of 7.2% and 32% compared to the last quarters of 2010 and 2009, respectively. For new apartments in downtown Riga (also in renovated buildings), the average price in Q4 was EUR 1,965 per square meter – 9% more than a year ago, and an increase of 18.2% compared to the last quarter of 2009. The fastest price growth has been shown by new apartments (and apartments in renovated buildings) in Old Riga. The average price of these apartments in Q4 was EUR 3,415, having risen by 27.1% and 45.9% from the respective period in 2010 and 2009. When comparing the third and fourth quarters of 2011, the prices of new apartments in Old Riga have grown by 7%, and have remained unchanged in the city center and residential neighborhoods.
The average price of standard project apartments in Riga fell by three euros in December, dropping to EUR 573 per square meter. In a period of 12 months – from January to December 2011 – the average price has declined by 1.5%.
“The trends that we have been seeing in the housing market of Riga will continue in 2012 – the level of activity of buyers in various segments, and consequently also the price dynamics, will differ. It is too early to predict rapid changes in demand on the part of the local residents, so activity in the segment of standard project apartments, and also in the private house market, will remain at the level of 2011. These buyers will mostly show interest in quality properties whose price is adequate for the market. A stable demand of foreign buyers for new and renovated apartments in downtown Riga and Jūrmala will also remain,” tells Vija Gailīte, head Head of Latio Housing Sales Department.
In describing the current offer, Gailīte notes that all apartment segments of Riga still lack good properties for an adequate price. The number of good standard project apartments placed on offer has also been lower in recent months. One of the reasons is price stagnation, which is forcing sellers to wait. In addition, owners who purchased an apartment by taking a loan, but would now like to sell it, are forced to postpone the step, as the current price would not cover their own obligations. Foreclosed homes that are now owned by banks and their subsidiaries comprise new additions to the market.
In a trend that has gained traction after the collapse of Latvijas Krājbanka and the rumors concerning Swedbank, there is increasing interest in alternative forms of investment, with purchase of real estate being one of the options. “Real estate is currently an attractive object of investment. This is also proven by the capitalization rate or profitability of rental apartments, which has rapidly increased during the year and stands at a level of 5–7%, depending on the type of apartment. Demand in the rental market will remain high in 2012, due to the effect of various factors,” Gailīte underlines.
Latio
Phone: +371 67032300
E-mail: latio@latio.lv
