Andrejs Kozels, Director of the housing department at Realia (Latvia) – tells about how Latvia's accedence to the eurozone and the planned residence permit "cost" increase up to €250,000 will affect the real estate market - in an interview to ee24.com.
- In 2014 Latvia joined the eurozone. What has changed at the real estate market?
- We did not expect dramatic changes as the market has been mainly in euros. Transaction used to be in euros, and only property, located in the city outskirts, farms and in remote areas of Latvia was sold in local currency. Real estate in Riga, Jurmala and old city centers have been sold in euros for long. The same applies to mortgages: mainly in euros. Neither mortgages terms nor bank rates for buyers have changed after Latvia's accedence to the eurozone. The only thing that changed this year are prices that started to increase, but until now this has not affected the real estate sales.
- How the events in Kiev and the Crimea will affect the market? Will there be more buyers from Ukraine?
- We expect that the Ukrainians will buy property in Latvia. We ourselves operate in Ukraine, providing relevant information and hope that the people of this country will actively come to us. Although the Ukrainians come anyway.
- What is the outlook for the residence permit issue? Do you feel any foreigner’s boom?
- Foreign buyers mainly are not worried about the Latvian euro transition but about the fate of the residence permits amendments. Waiting Latvia to increase the minimum amount, and being nervous about possible limits. As a fact, we see that people trying to get into the existing minimum are more active. Realtors are sure that the increase will take place, but timetable is not yet known.
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"Latvia is a promising country for investment. We passed the crisis and were among the first to get over it. The recession was a significant, but it was followed by a rapid rise."
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Our president has shown himself in his best when he did not accept Immigration law amendments last year. He showed that this issue requires a reasonable approach but not a rash and talking "goodbye" to foreigners. Now deputies refused from quotas, but will raise the minimum price level up to €250,000. The market will suffer and the average level market will fly down without any doubts.
There will be an outflow of the part of potential buyers who purchased residence permit property for €150,000, i.e. for the minimum limit. But according to statistics such deals cost more than €200,000. It is difficult to find a normal property in Jurmala cheaper than for €150,000 and apartments in the center of Riga are for €180,000-200,000 or more. Transactions mostly take place at the primary market, and the price list for apartments in Jurmala starts from €2,500 per sq.m.
- Do the Latvians fear that foreigners will "grasp" the country by purchasing real estate?
- The bulk of buyers (about 70%) do not live in Latvia. They come with their families for vacation, or lease the property. They are not able somehow influence for situation in Latvia as the percentage of foreign residents is not big enough.
- There are rumors that Latvia soon will introduce the principle of leaving keys. How this will affect the mortgage situation?
- The bill is under consideration, but people do not queue up for a mortgage because of this. Deputies have not still obliged all the Latvian banks to use this principle, but at the current stage the right to return the keys is already in force in one bank. (In the case of financial problems the borrower simply gives an apartment to the bank and his obligations are over. Such conditions are less favorable for the bank and possible losses are "included" in a higher interest rate. – сomment of ee24.com). The credit with initial payment of 30-40% is not very beneficial on such terms. For comparison, in "regular" mortgage this index is 10% for new buildings and 20% for second homes. It is naturally subjected to the Latvian citizens as non-residents now make a minimum payment of 50% and pay 5-6% per annum. Compared with Russian banks, these conditions are quite good.
Interview: Alexander Fetyukov, Pavel Kuznetsov, ee24.com