Trade boom is the best epithet to characterize happenings in the sphere of Retail. After Latvia has joined the EU the interests of investors have increased and the economics of the country became more.
The Statistics calculated by the Commission of Financial Market and Capital shows that according to the data received by the end of March, 2005 the largest amount of credits is received in the field of Real Estate. For the last 5 years the leader in Credit's Politics was trade - now it is Real Estate.
According to the data provided by BNS (who used the data of the Commission of Financial Market and Capital) - the remains of credits issued to the residents for the operations with Real Estate were equal to the 516 millions of latvian lats. (LVLis app. Equal to the sterling pound) The sum of 516 million LVL is 19,5 % from the total remains of the total quantity of issued credits.
As to the Real Estate - the remains of issued credits increased to the 118% in comparison with the last year. The 2004 is considered to be successful in all the fields of accommodation construction. As the "Agency of Accommodation" informed, in 2004 - 2821 flat has been given to exploitation and the total area of these flats is 452,3 thousands of square meters.
In comparison in 2003 the increase of total area for the accommodation was only 194,2 thousands of square meters. As for the territorial margins the majority of new apartments were built in Riga, the capital.
In total - in order to broaden the market of New Accommodation 48,7 millions of LVL were invested. 16,5 millions of LVL were spent for refurbishment and reconstruction of the old houses and blocks of flats.
In case construction will continue on the same rate, than to 2065 the total amount of accommodation in Latvia will increase to the 32 millions of square meters. It will be enough to reach the Euro-standard which is 40 square meters per person.
The high level of issued mortgages will continue till the 2009. Till this year almost all the residents with the high level of income will have the new accommodation.
During this spring, all the banks (one by one) started to advertise the different programs connected with Real estate in order to attract new clients. Clients were offered low 5 rates in case they intend to buy house or flat, different kinds of discounts, simple terms and conditions of contracts etc. Thus they want to preserve the increasing rates of mortgage. And indeed, the increasing rates can impress: 2002- the total volume of issued mortgages increased by 91,9%, 2003 -104,9%, 2004 - 85,5%. In the first quarter of 2005 the residents borrowed 40 millions of LVL monthly, thus this year the residents of Latvia overcame the psychological barrier and the volume of mortgages reached and exceeded 1 billion of LVL.
Specialists declare that the rapid increase of mortgages will be over in 4 or 5 years. Specialists inquired 1346 people about their plans to buy the accommodation in the nearest future. It appeared that one third of the most "attractive" clients with the income level that exceeds 500 LVL per month have already obtained new flats or houses. 9% have the plans to buy accommodation this year, 18% in 2 years, 21 % in -3 or 5 years. Totally - 81% of the residents, whose income is from 250 to 500 LVL per
per months 24% have already bought the new accommodation, 10% are going to buy it this year, 11% in 2 years and 21 in 3 or 5 years. Totally - 66%. It appears that the majority of potential clients are planning to solve their problems with accommodation in the nearest future that is why we declare that the rapid increase of mortgages will be over in 2009.
The construction is flourishing in summer, not only in capital, but also in our famous resort city - Jurmala. According to the certain data, 20-30 new projects are ready for realization; 7-8 are already in the process of construction. The accommodation in Jurmala may cause interest of quite a broad layer of residents including potential summer-house owners, construction companies, and investors, who are interested to invest in rapidly developing and already active market of Real estate. It is easy to understand, Jurmala attracts wealthy people and entrepreneurs. If earlier the wealthiest people of Latvia wanted to live in Baltezers, now they tend towards Jurmala.
Nobody had performed precise calculations yet, but in case we imagine the quantity of Latvian (and not only Latvian) millionaires per square meter - Jurmala can become a competitor to the capital of Baltic States - Riga. As for the competitive prices - only centre of Riga (and probably even only Vecriga "The Old Riga") can be the competitor of Jurmala.
There are two choices in front of a person, who decided to buy a permanent or seasonal Real estate in Jurmala, i.e. whether it will be a flat or a house (summer house). As for the price - this parameter is important but not always crucial - some flats are more expensive than certain houses. House has the certain specification and asks for the certain life style that is followed by the chain of different technical conditions that should be taken into consideration by a person who is not going to live in Jurmala all the year round (security, care for the territory around the house).
As the experts inform, the demand for the private houses, cottages and summer houses in Jurmala is stably high and because the quantity of houses is restricted we shouldn't wait for a decrease in the demand. This concern newly built accommodations and accommodations that are already ready for new inhabitants. Specialists declare that it is cheaper to buy a new house which is already built than to build it yourself. At least because of the inflation (they were projected and contracted for cheaper prices). Now Jurmala looks so attractive that some houses are sold even for 2-3 millions. Often the customers are from Russia or other Post - soviet countries.
All in all, the average price for a new accommodation in Jurmala is 2000- 2500 EUR per square meter, and it is even higher closer to the Gulf of Riga. New projects, which are could “The second wave of new construction" are notably expensive- 3000- 3500 EUR per square meter.
As the pull showed the situation with the new projects is not so rosy as it may seem from the first glance. Despite the fact that there are around 20-30 fresh projects of different class - from the Range Houses till the blocks of flat(for 6-10 flats), and for blocks of flats where more than several tens of flats will be built - the real constructional activities are held only in several projects.
Despite all this all the experts are sure- the market of Construction in Jurmala will develop and expansion is only a question of time. The crucial factor here can become a price for the prestigious accommodation. The construction companies are very interested in this segment, for it is very promising and they expect high income from their investments. Only the customers should understand that the prices will be from 3000 to 4000 (and, as several experts think up to 5000) and they also should take into consideration the increasing value of land and the fact that there is not so much territories in Jurmala.
The quantity of places for construction in Jurmala is restricted, that is why some construction companies estimate the variants of building a kind of skyscraper here. Especially prestigious and expensive are the territories which are close to Gulf and on the route from Lielupe till Majari (and sometimes even further). The costs of land even now vary dramatically - from 300-400 EUR for square metre, till 500-600. The Auction of Jurmala Council has been recently held and as a result the territory of 2 hectares in Dzintari was sold for 630 EUR per meter.
The segment of accommodation for elite is under formation. The quantity of people, who is able to purchase this kind of Real Estate is estimated as 30 000, but the percentage of this group of potential customers in market is only 0,2%. That is why the demand of this market is far higher than the offer is. Here are some of the criteria of elite Real Estate: place, special terms and conditions of obtaining, corresponding neighborhood, the existence of the 24/7 security, expensive construction materials, the level of comfort, the uniqueness of project (the only offer of this type in the market), infrastructure (corresponding service, the lack of non-prestigious buildings in the neighborhood), individual planning and original architecture, certain elements that upgrade the level of comfort (conditioners, underground parking, concierge, etc.)
United Baltic Ltd. has also offered new segmentation of this market of exclusive Real Estate for elite. The difference is as follows: elite project is unique offer in the market, which only few can afford. Unique projects are singled out because of their unique parameters. One shouldn't expect the prices for the new accommodation in Jurmala to reduce. At the moment, maximal price of accommodation in Jurmala is 5000 for square meter. In case the period of adaptation will be longer than expected, developers can suffer the decrease of their profit, but, still, the customers should not hope for the great reduction of the prices.
The biggest part of accommodation in Jurmala will be oriented to the sector of exclusive accommodation, but it is evident fact that there is a lack of accommodation for the middle-class. But developers think, that summer flats that cost 300 thousands EUR and more are too expensive for the Latvian middle class. That is why those, who is not wealthy enough should think about something else than accommodation near the seaside. From the all above mentioned it is clear that the majority of construction companies are building the Real estate in Jurmala for foreign customers and they will sell property via their own schemes and channels, trying to avoid the advertisement.
In one of the pulls organized by United Baltic Ltd. there was a question - In which district of Riga You would like to buy the new flat? It appeared that the points of view of the construction companies and potential clients differ.
500 people, whose native language is Russian, and 200 people, whose native language is Latvian participated in the pull. Russian speakers are more conservative. 1 /5 of respondents would choose the newly built block of flats in the same district where they are living currently. Those, who are more liberal (15% app.) would choose Purvciems or Imanta.
On the second place in the scale of popularity is Mezapark. Kengarags is on the 4th place, before Pljavnieki, Zolitude and Agenskalns. Kengarags is not very popular district that is why it was a surprise for us.
There is quite different situation among respondents, whose native tongue is Latvian. They are not so conservative and are keen to change the districts where they live. They would choose Agenskalns or Purvciems (those districts share the first place) and Imanta (2nd place).
As for the unpopular districts both Latvian and Russian speakers are of the same opinion. Zolitude and Sarkandaugava are on the last positions of the top chart. Only 2-4% of respondents would choose those districts as a place for living.
It is interesting that the interests of Constructors and potential customers coincide only in case of one district - Purvciems. During the last years the biggest quantity of new blocks of flats was built here. Since 2000 - 23 projects or 26% from the total amount of newly constructed blocks of flats in Riga were built in Purvciems. In other districts the wishes of potential customers and the actions of those, who organizes construction dramatically differ. There are only 3 projects in Mezapark, 4 in Agenskalns and 7 in unpopular Sarkandaugava. Imanta- one of the most popular districts has been ignored till 2005. The Kengarags is ignored as well, and it is not beneficial situation, because the interest towards this district is great. But in the nearest future this situation can change to the better. For example in Imanta in 2005-2006 will appear not less than 5 new projects, 3 of them are very big, calculated for several hundreds of flats.
The costs of Real Estate in Latvia will increase, but it is very important to find the balance between the growth of prices and development of the State - declared the former president of the European Council of Real Estate Market Professionals (CEPI) and the Chairman of working group, which deals with information.
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Property in Bulgaria - INFO FOR INVESTORS - MARKET OVERVIEW - Conclusion
