Karlen Kalashyan, CEO of the Latvian real estate agency Property Selection, told the portal ee24.com, how the real estate market in Latvia will change, if the financial bar for obtaining a residence permit will be enhanced. Now the "golden visa" in this Baltic country cost at least €142,288 in the metropolitan area, or €71,144 - in other regions. Thus, Latvia is more accessible and substantially "cheaper" to foreign investors than Spain and Portugal.
- You can buy the land for €100,000, build a house for €50,000 or buy two apartments for €72,000 and get a residence permit in Latvia, - says Karlen Kalashyan. - Each case is quite different. At the moment, the Latvian offer is extremely favorable. For example, Portugal offers a "golden visa" if you buy real estate of the total value over €500,000. Spain initially wanted to offer a residence permit for €150,000, but now this amount will increase to €500,000.
If we consider the real estate market in Europe, Latvia has, in fact, dumping prices. I note that the amount of investment that foreigners have invested in the Latvian economy in order to obtain a residence permit exceeded €525 million by the middle of April 2013. And the level of funds invested in real estate exceeded €418 million, according to the Migration Department in Latvia.
The Republic of Latvia will enter the eurozone in 2014. And, most likely, the European Commission will oblige to raise the price of Latvian "golden visa" to €250,000 - €300,000 to adjust the real estate market in Europe. Moreover, we can consider the budget of Latvia in 2013-2014. The government plans to cut the budget deficit from 1.4% (in 2013) to 0.8% (in 2014). How to make money? Need the financial activities of citizens. Interest rates will climbed from 1.6% to 3% with the entry to the eurozone, and the purchasing power will fall, including the real estate market. At the end of April 2013, according to the Financial Times, foreign capital amounted to 49% of the total deposit portfolio of Latvia. In this case, 80-90% of foreign capital, according to the IMF, owned by the citizens of the former Soviet Union.
With all of these factors it can be safely assumed that since 2014 obtaining residence permit in Latvia will become more expensive, and the cost of the "golden visa" will rise to the bar €250,000 - €300,000. The government will encourage foreign citizens (mainly from Russia) to spend more money on the property.
- How will be changed the real estate market?
- The effects can be twofold. The rapid rise in primary property is not expected. The market still has a lot of real estate banking. In addition, the banks control the price of new housing, as finance construction. But premium flats and exclusive homes can grow in value. The market will require it: the buyers of the property in the first place aim to get a residence permit, and there are some offers, consequently the owners of properties worth €150,000 - €200,000 will raise prices.
Now the relevance of property's assets in Latvia is extremely high. And the housing segment near the center of Riga worth €1,000-1,200 per sq.m. can give a more stable growth than projects at a price of €3,000-3,500.
- How to buy real estate in Latvia with a mortgage?
- Each bank has own rules, but in general the problems with getting a mortgage for Russian citizens will not arise if the down payment is 60% of the total value of real estate (some banks issue at 40%). This operation will take about 3-4 weeks.
- What are the details of the purchase real estate in Latvia?
- Despite the fact that Latvia is a former Soviet republic, the purchase of real estate is rather difficult procedure which you may turn to professionals. After the initial selection we will arrange a transfer free of customer directly from the house to the subject. Approximate amount of additional lump sum payments when buying real estate in Latvia is 2% of the cost. Our company takes care of all the paperwork costs for legal professionals. We have been working for many years on the real estate market and can offer our clients premium service, regardless of the value of the object.
Buyers of real estate in Latvia should be aware of the cost of maintaining the property, as the annual real estate tax, the amount of which depends on the region and is 0.3-0.5% of the cadastral value of the property, which is determined by the state and accounts for approximately 50-80% of its market value. Fee for utilities, for example Riga's apartment of 70 sq.m., is €100-150 a month in winter and €50-70 in the summer. In Jurmala, which are based exclusively apartments, things are different. Tax on such real estate is about €1500-3000 per year.
Text: Peter Kovacevic, ee24.com