Nai Pickard

Latvia becomes a dacha for Russians?

According to our colleagues from NAI Becar and NAI Baltics, an apartment in Riga can be bought at a price of 50 thousand euro, one-room apartment in “khruschevka” – for 25 thousand. This is at least half the price of similar offers in St. Petersburg and almost 3 times cheaper than the most economical offers in Moscow. About 1000 euro per sq m is the cost of houses in the most prestigious districts of Riga and on the Riga coast. In Leningradsky region only old wooden houses in farmlands are offered at comparable prices.

“There are several prestigious districts in Latvia, including those with properties in the “average” and “above average” segments – notes general director of NAI Baltics Valdis Ligers. – The supply of elite properties in Latvia is not in great demand. These properties are in the quiet centre of Riga, in old Riga (though, it is a noisy place during weekends), in Mezhaparks districts, in elite district Baltesers with snow-white sandy beaches on the lake of the same name (10km from Riga), Jurmala communities on the west of the bay (70km from Riga), and properties on the eastern side of the bay – in Vetsaki, Saulkrasty, Skulte districts (30-70km from Riga).”

Analysts from NAI Becar calculated that the average price for residential properties in Latvia have dropped 56% during the crisis, however, due to the high demand in some segments of quality real estate this index has grown by 16% since the beginning of the year.

Relatively low prices for the property are even more attractive in view of the ecology, which is more favourable than in Russia, has a milder climate and membership of the European Union. Demand has been stirred by the recent changes in the immigration law: from the 1st of July 2010 foreign investors, who invest more than 140 thousand euro in the country, obtain a residence permit and the right of visa free travel within the European Union for themselves and their families.

“It should be noted that Riga and Jurmala are not Russian suburbs, - adds general director of the NAI Becar office in St Petersburg, Sergey Kozlov – entertainment - concerts, festivals etc – are very well developed in Latvia. The level of service complies with Western European standards. Also it is possible to reach Latvia in 45 minutes by plane from St. Petersburg and 2 hours from Moscow. “

Yields for development projects in Latvia are up to 20%.  The most attractive are residential adapted re-use projects in wthe business class. For example, an average-level hotel in Riga is offered for 800-1000 euro per sq m. Considering existing seasonality (season is 3-4 months) and average occupancy of 26% the yield for hospitality projects is rarely higher than 3-4%. However, after re-developing the property into a residential project, the yield can be about 15-20%. The indices are similar for the re-development projects of old dilapidated buildings: if one invests about 500-800 euro per sq m in residential development of popular segments, the yield for such projects can be up to 20%.

“Membership in the European Union makes Latvia more attractive for foreign investors, as there is the additional benefit of low risks of their investments”- says the managing director of NAI Bacar David Godchaux. – Such a viewpoint contributes to the increase in demand for Latvian properties by Russian investors.