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New housing projects in Latvia

Analysis of new housing projects market (November 2004 - April 2005)

Main points in brief for the period between release of the second issue of Jaunie Proekti catalogue and starting the third one the number of new projects increased by 21%.
15% of housin g estates announced in the second issue of the catalogue have not been relalized by the term fixed  breakthrough" of new construction beyond Riga city borders in 2004
price of one square metre in new flats has already reached 5000 euros
in some projects increase in price for 6 months amounted to 50%

According to the data of the third issue of Jaunie Projekti catalogue by April 2005 information on 327 new projects is available on the market. For six months passed since the release of the previous issue of the catalogue total number of the projects increased by 21%.

As it was before, the largest in number of offers is multi-apartment houses segment which at present moment is represented by 190 projects what amounts to 58% of total number of new housing offers. In comparison with September 2004 the number of the projects increased by 22%.

The number of housing estates amounts to 107 projects or 33% of all new housing projects (+20%). Less substantial growth rate has been observed in the segment of in-line houses, the number of projects here is still small - 29 projects or 9% of total number of newly-built houses.



The tendency: developers sell projects and delay realization terms

It has to be noted that terms of realization of some announced multi-apartment projects has been delayed and the future of the construction is not known. As catalogue Jaunie Projekti is informed, the number of such projects includes houses at 6 Krasotaju Srteet and at 2 Miera Street as well as Saharova Nams. Compared with total number of multi-apartment objects offers it is an insignificant figure. But the situation is somewhat grave in the construction of housing estates.

As data of the catalogue show about 15% of real estates to be completed in 2004 have not been realized. Developers do not abandon them but terms of private mansions construction are delayed.

One more curious tendency has appeared on the new housing market - resale of projects. As data of the catalogue show such well-known projects as Vestastari, Dzeņu iela, Da Vinchi have already become subjects of concluded deals. The revealed tendency has not yet become a wide-spread practice: in comparison with total number of multi-apartment projects the number of resold ones is insignificant.

Multi-apartment houses
Attention: regions and districts
When examining dynamics of growth of territorial segments of multi-apartment houses a sharp jump in activity in Riga District around the capital is especially noticeable in comparison with stabilized development of construction in the centre and outskirts districts (micro-districts) of Riga. If in 2003 only one project was realized there then by the end of 2004 their number rose to 19. Positive dynamics was observed in the republic's regions as well. Last year the first three projects beyond Riga's borders appeared though before that moment not a single one existed. So the year 2004 could be safely called a turning point for new construction outside Riga.



Also should be mentioned the tendency of growth in new multi-apartment housing construction in certain districts of Riga. After the central part of the city the micro-districts considered to be the most popular are Purvciems, Pardaugava and Ziepniekkalns. It is noteworthy that in several micro-districts of Riga (Imanta, Teika, Chiekurkalns) new construction started only in 2004.

Scale and height

According to Jaunie Projekti catalogue new housing projects have become larger. In 2005 5,606 flats are planned to be put into operation what is an increase by a third in comparison with what has been built for the past five years (just for comparison: at present moment there are only 6,000 flats on the secondary market).

The tendency of increasing scale is supported by data for the year 2006. Next year it is planned to put into operation 2,943 flats, an increase by 200 flats in comparison with 64 projects in the year 2004.

Starting from 2004 developers started to give preference to construction of entire complexes of houses consisting of 500-700 and more flats. Because for businessmen it is much more profitable rather than to erect small houses. However, it did not affected at all sale price of one square metre of a flat in newly-built house. Demand for new housing remains unsatisfied so businessmen have no reason to lower prices.

In the beginning of this year new plan of Riga development was approved and it determines number of storeys norms in Riga's districts. The market responded with lightning speed. At present moment several high-rises are in the process of development:

Vertikala Pasaule on the left bank of the Daugava River, resold project Da Vinchi and one more project in Purvciems. These prjects so far have not been officially announced on the market but as Jaunie Projekti is informed their height can exceed 35 storeys.


The farther the cheaper, the later the more expensive

As to level of prices in new multi-apartment housing construction projects, here more and more significant  stratification" of prices is being observed. The largest price amplitude is in the centre of Riga: among projects of 2004-2006 period minimum sale price is 350 Ls/sq.m and maximum is 3,400 Ls/sq.m (project at Alberta Street).

The most inexpensive housing can be found in the outlying districts where minimum price is 185 Ls/sq.m (renovated 5-storeyed house in Baldone). On the whole, the lowest average prices level in regions of Latvia is 320 Ls/sq.m while maximum price there is 460 Ls/sq.m.
Average price of serial-type housing in Riga's outskirts districts is 450-500 Ls/sq.m what is just insignificantly lower than average level of 600 Ls/sq.m in new construction with evident advantages of the latter.

As to location the highest average price in new construction projects was registered in Jurmala - 1,250 Ls/sq.m.The second place is taken by the centre of Riga (1,020 Ls/sq.m), the third one - Mezhapark and Agenskalns (approximately the same level). The bottom place among Riga's districts is occupied by Kengarags - 430 Ls/sq.m.
Comparative analysis of data of the third issue of the catalogue and two previous ones allows to expose one more tendency: how price in new projects changes as construction of an object goes on.

It is possible to fix growth in price in one and the same project in the beginning of construction and reservation of flats and in the end, when the house was put into operation.

The biggest price increase in one and the same project from the moment of flat reservation till putting the house into operation was registered in the house at 7 Anninmuizhas - it amounted to 50%. The second place in increase is taken by 3 Dzimta seta project (45%), the third place - Mezaparka varti (33%). In average in the country the cost of flats in new projects increased by 4-8% despite some market experts' talked about increase by 25%.

 


Housing estates and in-line houses

According to the catalogue's data offers of housing estates without concept still dominate on the market. Completion of many of those planned to be realized in 2004 has been postponed. The tendency is explainable enough: only year ago developers were sure that buyers will  snatch away" land plots with attractive price, then they will build communications by common efforts, put the territory in order and life will be in full swing... Nothing of the sort happened.

Construction of minimum 150 mansions is planned in some projects and this is huge figure on Latvian scale. Maintenance of private house requires more time and money, they are not comparable with flat maintenance costs. For middle class buyers it is a serious obstacle and well-to-do people are inclined to buy a house in  conceptual" housing estate: let it be more expensive but it is more reliable.

As a result demand for houses has not justified optimistic forecasts of developers and of 44 projects of housing estates announced in 2004 in reality only 29 have been realized.

The same bright future was foretold for in-line houses a couple of years ago. And again expectations have not come true. 6 projects were announced for realization in 2005 and only 5 in 2006. Although, unlike housing estates, in-line houses are always completed by developers by the time fixed, because all of them are situated within the city borders.
The most
In Riga
Attractive - Mastu Nams)
Large-scaled - Viestudarza Majas and Panorama Plaza
Exclusive - Alberta
Unusual - Shokolad
In Jurmala
Dzintara Projekti (three projects with unified architectural style, exclusive location, quality construction)

Conclusion
The difference in price of one square metre in the old serial-type flat and the flat in newly-built house today amounts to only 150 Ls/sq.m. So there is every reson to suppose that new housing project market has vast prospects. According to data of the catalogue in 2005 the number of new flats will be 1.5 times higher than number of flats built within past 5 years. We shall see new interesting projects.

Just before the catalogue Jaunie Projekti went to printing press it had become known about 12 multi-apartment housing projects. 8 of them are in Riga (about 300 flats) and 4 others are in the provinces (about 200 flats). Besides, information about 8 housing estates and two projects of in-line houses became known.


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At the beginning of the year the influence of the quantity of new projects (10% of market) on the secondary accommodation market was not felt very strongly.

Many people, who hoped to buy the flat in one of the new project buildings ant the middle of the year gave the priority to the secondary market, because they could not afford to buy a flat in the new building. At the beginning of the year the difference between price of a new flat and serial standard flat was twice as high (although it was hidden very often). In November the difference between refurbished standard flat and new flat was not so big - the price of the sq. m of the refurbished flat was 720 EUR and the new flat without internal walls coasted also 720 EUR for square meter. Despite this the majority of customers chose the refurbished old flats in the Soviet Union type block of flats, without any wish to invest additional resources in the finishing of internal works in the new projects that would cost at least additional 140 EUR per square meter.

The end of 2004 mark the tendency towards the almost equal price of 800 EUR per square meter between the new projects flats and old refurbished flats in prestigious districts and houses. The flats in new projects are bought quite quickly. Additionally the prices for the accommodation grow, because prices for other goods grow as well.

In 2004 the self value of building works increased for 6%.