Real estate market Baltic countries have different development cycles, Latvia still lags far behind its neighbors – Lithuania a Estonian. But definitely the market will continue to grow, especially in Latvia. There are no worries about bubble formation yet.
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However, in Lithuania and Estonia, the housing market is already approaching the peak of the cycle, in the discussion “Baltic real estate market: boom or bubble?” Organized by the Baltic-German Chamber of Commerce (AHK). said Andrius Barštys, Head of Capitalica Asset Management, the executor of the Verde business center. In terms of commercial property, this could not be said.
“Colliers” partner and CEO in Latvia Deniss Kairāns believes that there is no real bubble in the region, he sees no reasons for it. Latvia has been in decline for a long time, and even a boom could not be talked about yet, and there are many opportunities both in the housing sector and in the field of commercial property.
There are several reasons why Latvia has lagged behind its neighbors. Most of all – Latvia suffered the most in the previous crisis, and according to Kairan, there is also a mentality to blame – in Latvia people are more cautious, local developers do not take too much risk. Even now, there are merchants from neighboring countries on the “battlefield”. Estonians are more active in the field of housing, while Lithuanians are more active in the field of commercial property. According to his estimates, only 10-15% of cases could talk about local capital and, of course, would like to see more domestic players and their funded project.
Currently, several office building projects have been started in Riga as well, and often the question is – who needs all this, who will use it? According to Kairan, one of the opportunities is to be found in the public sector – many institutions are located in poor premises. The second source, which is talked about more often – new companies, Lithuania has done well in attracting them, and Latvia should make even more efforts.
“Luminor“The bank’s senior real estate loan analyst Romans Raivets reveals that in the bank’s opinion the market of all three Baltic countries is similar, it is perceived as a single one. However, he also admits that the situation is slightly different in Latvia – both because of the crisis and because Banks are more conservative here, average rates are slightly higher, while competition between banks is less pronounced than in Lithuania and Estonia.
Meanwhile, “SwedbankAt the event, presenting a vision of what is happening in the real estate market, Normunds Dūcis, the head of the bank’s Mortgage Lending Division, also speaks similarly. , adds Līva Zorgenfreija, Swedbank ‘s chief economist in Latvia.
Household savings have increased significantly during Covid-19, part is directed to the purchase of property, but in terms of the number of transactions Riga lags behind the neighboring countries (it is worth mentioning that in Estonia the market is also stimulated by the inflow of funds after withdrawing . However, our growth rate has also increased. In addition, the demand for a loan to purchase or build a home has grown significantly this year (by 28.4% during the quarter).
According to Zorgenfrey, market activity could increase further, as the purchasing power of households is expected to increase, and our market has long lagged behind market activity in the neighborhood. Most likely, people will more often choose more energy-efficient and high-quality housing, the share of standard-type apartments in transactions will decrease. Deterrents could include insufficient supply and rising construction costs, which would also mean higher house prices, which could be unacceptable to people.
Dūcis emphasizes that there are developers who are currently slowing down construction precisely because the price level of the final product could become “unbearable” due to rising construction costs.
Even if another wave of the virus comes with restrictions, the activity is unlikely to decrease significantly. There was no decline in a similar situation before, because people wanted to improve living conditions, he says. The price is pushed up by costs, high demand (especially for the construction of private houses and new apartments), and for a long time Latvians had invested less than their neighbors. Of course, the demographic situation may not be bright, but the big difference with neighboring countries is not explained.
And only now the total bank loan portfolio has stopped dilt and begins to grow moderately. Therefore, in his view, in general, there is no basis for housing prices to fall right now.
It is not possible to predict how soon the convergence between the capitals of the Baltic States will take place. It will largely depend on general economic developments. For example, Vilnius, as mentioned above, was very active in attracting investors. This is an important factor that stimulates the market, moreover, people who have left are now returning from abroad, while there is still talk of an outflow in Latvia.
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