Latvia's real estate star falls
Monday, 29 October 2007
RIGA, Oct 28 (AFP): With real estate prices having risen 500 per cent since 2002, Latvia has long been an investment hot- spot where the sector has outstripped its counterparts in EU member states.
But the Baltic state's property firms are getting gloomy as a government anti-inflation drive bites and jitters spill over from the United States' home loan crisis.
"Activities in the market have slowed down considerably. People are waiting, though nobody can really predict what will happen in the future. The situation is bleak," Aigars Smits, head of the Arco Real Estate company, told the news agency.
Real estate prices began dipping in Latvia in May, after the government introduced a package of measures to fight rampant inflation, including stricter rules on issuing mortgages.
Latvian authorities say that the number of real estate transactions has now shrunk to the level of 2001, before the boom kicked in.
In January, there were a total of 38,282 registered deals. But last month the figure fell to 25,689, or 10,800 fewer than in September 2006.
Since notary deeds are required to launch a real estate deal, figures from that profession are also food for thought:
Ilze Pilsetniece, head of Latvia's notary council, said requests for deeds have dropped by 40-50 per cent in recent months.
In September, the price of apartments in the city's standard Soviet-era housing blocks dropped by 1.2 per cent compared to the previous month.
According to calculations by real estate agency Ober-Haus, the average price for such apartments is 1,570 euros (2,236 dollars) per square metre. The figure is still five times higher than in 2002, and represents a hefty mortgage burden for would-be buyers in a country where the average gross monthly salary is worth around 550 euros.
Prices in Riga's prestigious Old Town district, meanwhile, range from 4,000-6,000 euros per square metre.
Market confidence has also taken a battering because of the US subprime crisis, caused by the default-fed collapse of firms which provided mortgages to people with poor credit histories, often allowing them to buy homes beyond their means.
"Besides local factors, there is a worsening situation in global financial markets. The crisis is near," said Vladimirs Markovs, head of the real estate company Nira Fonds.
Latvia's economy has been growing rapidly since the country joined the European Union in 2004, fuelled largely by consumption.
In 2006, it grew by 11.9 per cent, the fastest rate since independence from the Soviet Union in 1991 and one of the strongest growth rates in the EU.
But the Baltic state's property firms are getting gloomy as a government anti-inflation drive bites and jitters spill over from the United States' home loan crisis.
"Activities in the market have slowed down considerably. People are waiting, though nobody can really predict what will happen in the future. The situation is bleak," Aigars Smits, head of the Arco Real Estate company, told the news agency.
Real estate prices began dipping in Latvia in May, after the government introduced a package of measures to fight rampant inflation, including stricter rules on issuing mortgages.
Latvian authorities say that the number of real estate transactions has now shrunk to the level of 2001, before the boom kicked in.
In January, there were a total of 38,282 registered deals. But last month the figure fell to 25,689, or 10,800 fewer than in September 2006.
Since notary deeds are required to launch a real estate deal, figures from that profession are also food for thought:
Ilze Pilsetniece, head of Latvia's notary council, said requests for deeds have dropped by 40-50 per cent in recent months.
In September, the price of apartments in the city's standard Soviet-era housing blocks dropped by 1.2 per cent compared to the previous month.
According to calculations by real estate agency Ober-Haus, the average price for such apartments is 1,570 euros (2,236 dollars) per square metre. The figure is still five times higher than in 2002, and represents a hefty mortgage burden for would-be buyers in a country where the average gross monthly salary is worth around 550 euros.
Prices in Riga's prestigious Old Town district, meanwhile, range from 4,000-6,000 euros per square metre.
Market confidence has also taken a battering because of the US subprime crisis, caused by the default-fed collapse of firms which provided mortgages to people with poor credit histories, often allowing them to buy homes beyond their means.
"Besides local factors, there is a worsening situation in global financial markets. The crisis is near," said Vladimirs Markovs, head of the real estate company Nira Fonds.
Latvia's economy has been growing rapidly since the country joined the European Union in 2004, fuelled largely by consumption.
In 2006, it grew by 11.9 per cent, the fastest rate since independence from the Soviet Union in 1991 and one of the strongest growth rates in the EU.