Latvia, Real Estate

In February 2009, apartment prices fell 41.6% year-on-year.

Chairman of the board at Balsts Aigars Zarins said LETA that increasingly more buyers purchase apartments using their savings; already around a half of the apartment purchase deals are carried out without mortgaging.

"There is no doubt that prices will continue to fall, already now in some neighborhoods of Riga apartment prices have shrunk to EUR 600 (LVL 420) per square meter," Zarins said.

Before issuing loans, banks carefully assess applicants' existing liabilities, furthermore, almost in all cases they demand the borrower to have a guarantor.

Some apartment sellers are now trapped in a situation when the amount they have to repay to banks is larger than the current market price of the apartment, Zarins pointed out.

According to Balsts data, property rental was the most active property market sector in winter 2009. The offer is extensive and enterprises are making use of the situation to reduce their expenses by relocating.

The average office space rent prices now range between seven and nine euros (LVL 4.9 to LVL 6.3) per square meter.

"The current market situation is very interesting – the highest activity is in the rental market, enterprises and households are trying to benefit from the current situation and reduce their monthly costs. Apartment sales market, despite the rapidly decreasing prices, has not yet adapted to the new situation with the same speed because of the strict regulations that buyers have to be met to take out a mortgage loan. As long as nothing changes in banks' crediting policy, apartment prices will continue to shrink, very possibly at the same pace as now," Zarins said.