Investments, Latvia, Real Estate

Downtown Riga – Offer Deficit

“Today the main problem of the rental market in premium class segment – deficit of objects on offer”, says Vestards Rozenbergs, co-owner and Chairman of Board of Baltic Sotheby’s International Realty. According to him, requirements of the potential tenants have remained unchanged over years: new or renovated building with a concierge, security, parking space, and, definitely, good decoration. Apartment owners often ignore the last requirements hence the limited number of offers. 

The most popular location among tenants still remains the so-called embassy district of the capital. Old Town takes the second place in terms of popularity. “Foreign high-class experts, such as bank employees or engineers, people for whom it is convenient to reach workplace in the centre, tenants without family as well as those who fancy noisy, worldly life prefer renting an apartment here”, notes V. Rozenbergs.

In the past year stabilization of prices in premium class object rental segment has been observed. Prices are approaching their pre-crisis levels (before they were artificially raised to 20 euro/sq.m) and at the moment they stand at 12-15 eiro/sqm depending on the apartment area. However, sometimes costly offers are realistic and reasonable, such as projects located on Martas, Valnu (Vaļņu), Vagnera (Vāgnera), Alberta, and Vilandes (Vīlandes) streets.

Structure of tenants of premium class apartments in downtown Riga have remained practically the same over years – diplomats, heads of big international companies who prefer renting an apartment with 2-4 bedrooms, with or without furniture in long-term.

A new caste of landlords has emerged lately – foreigners who have acquired apartments in new projects located practically in downtown Riga – buildings on Skanstes iela, Tomsona terases etc. According to practice, the majority of foreign buyers rent out real estate.

Jurmala – Genre Specifics

“Rental market in Jurmala is specific enough, it takes a separate niche and does not obey by the rules that work even in resort towns”, thinks Ilze Mazurenko, co-owner of Baltic Sotheby’s International Realty.     

About 90% of “summer” rental agreements are short-term. According to I. Mazurenko, there are several periods. “Naturally, the most popular is summer (from one week to three months), another period is during the young pop singers’ contest New Wave. And this year there is also a third season – New Year celebrations”, adds I. Mazurenko.

This year another striking trend was observed in real estate rental segment in Jurmala. Normally rental agreements are concluded systematically – January through June. However, in 2012 a large part of agreements was drawn up during the first three months of the year – January – March.

“Spoiled owners of real estate in Jurmala who were used to no hurry and renting out their real estate for 3 months at a time during “years of abundance” rejected potential tenants. When May came, it was clear that the latter had already changed their plans and gone on holidays to Cyprus, Spain and even Palanga”, I. Mazurenko shares her observations. “In the end, this summer those owners who chose our proposed “term combining” strategy by renting out apartments short-term were the winners.”    

Traditionally, in Jurmala the offer of houses for rent is bigger than that of apartments as apartments are bought by foreign investors for living.

Generally rental rates have decreased slightly. Many owners charged 40,000 euro for a house with 5 bedrooms per summer, though their actual value was 30,000 euro. House rental in downtown Jurmala cost tenants 6-8 thousand euro/month while houses with more expensive decoration and swimming pool – 10-15 thousand euro/month. Where as apartments were rented out for 3000-3500 euro/month.