The real estate sector in Latvia is slowing down
An increase in supply on the market in 2022 has contributed to a decrease in real estate prices in Latvia. For example, the price of a flat in the capital city fell by 16%, although there was a 3.6% increase in 2021.
It should be noted that these are actual prices that consider inflation. In nominal terms, housing prices continue to rise, but the dynamics have slowed compared to the previous period. In 2022, the prices of flats and houses in the country rose by almost 1.6%, while in 2021, the increase was 12%.
This situation is due to an increase in supply. For example, in November of last year, the number of flats for sale in Riga increased by 53% compared with the same month in 2021. At the same time, the number of apartments in large housing estates in the capital increased by 73%. In general, in 2022, the volume of housing purchase transactions in Latvia has increased significantly. One of the critical factors in this trend was the removal of covid restrictions and opening borders. As a result, foreigners have become actively interested in the local real estate market. Before the pandemic, 70% of all transactions in the sector were carried out by non-residents of the country.
Riga real estate market
A 2-bedroom flat in Riga costs 172 thousand euros. At the same time, the monthly rent will be 750 euros. The yield, in this case, will be in the range of 5.2% per annum.
The primary housing market is Riga, which accounts for most transactions. A gap between the cost of secondary properties and new buildings characterizes the real estate sector in the capital. High prices of new flats stimulate demand in the secondary market. The price per square meter of flat ranges between 500 and 1000 euros. The popular area in Riga is Teika, where properties are priced at 886 euros per square meter. It is followed by Imanta and Zolitūde, with a price tag of 803 euros per square meter. Real estate in Bolderāja is not so much in demand. Here, a square meter costs 535 euros.
The most popular option in the capital market is one-bedroom flats. A square meter in such housing costs 720 euros on average, and two-bedroom apartments cost 770 euros. The lowest price per square meter in three-room flats is 715 euros.
As for the forecast for the Latvian real estate market, analysts expect a decline in property prices, but it will not be catastrophic for the segment. In addition to the increase in supply, the processes are influenced by the interest rate revision. If regulators do not raise the interest rate, the fall in real estate prices will not last long.