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Friday, 26.04.2024, 05:09
Arco: rental market enlargement is a real support to young families
In Western countries, the following principle has been dominant already for a long time: persons who are not able to buy a real property due to financial reasons, should rent a home rather than make a commitment to a bank, concluding a mortgage contract for 20 – 30 years and living from salary to salary, stresses the specialist. The best way to realize at the national level the desire to help families is to construct new apartment buildings and rent them out at adequate prices which, within the framework of the program, should be lower than those existing in the open market and higher than those existing in the social houses.
According to the information available to the real estate company, the average construction cost per square meter now is 850 EUR, which means that an apartment of 60 square meters costs 51 000 EUR. Assuming that a new family, in addition to the public utilities, would pay EUR 150 for the rent of a municipal apartment, which is a totally adequate amount that any family can afford, the local government would recover EUR 1800 of the funds invested in the construction.
The price of a square meter of a standard-type apartment now stands at 622 EUR, which means that a new family must purchase a 60 square meters large apartment for around 37 000 EUR. Taking into account the desire to implement the so-called "returned keys" principle, the size of downpayment requested by credit institutions will no longer be limited to 10 – 20%. In opinion of Mr. A. Šmits, the downpayment amount will increase up to 40% which will bring new family even further away from purchase of their own home, so that approximately EUR 14 800 will be required for the down payment, and EUR 2 000 from this amount would be guaranteed (and not granted, donated or written off) by the state to credit institutions under the planned state aid program, reducing the new family’s downpayment up to EUR 12 800.
Knowing that the main obstacle for young families to obtain a loan from a bank is absence of money to make downpayment requested by banks, an enlargement of municipal housing would be a viable alternative because for the said amount of EUR 12 800 a new family could afford to hire a municipal apartment for seven years, and without any credit liabilities, says Mr. A. Šmits.
The local government must not buy land to construct a multi-apartment house in an economically active area where young families would willingly rent apartments for a long time because the local government already owns both free land plots and the compensable land fund.
ARCO REAL ESTATE is one of the largest real estate companies in Latvia. It was founded in Estonia in 1992. The company is listed on the Tallinn Stock Exchange since June 2007. ARCO REAL ESTATE commenced its activity in Latvia 17 years ago and currently provides services in Riga, Saulkrasti, Jelgava, Limbaži, as well as in Liepāja, Ventspils and Jūrmala. The company employs about 70 specialists of high professional qualification.