After the near collapse of some EU economies and several IMF bailouts later, house prices are on the rise once again, especially in Baltics that was one of the worst hit regions of Europe during the recent crisis.
EU has seen 2.3% increase while euro zone’s growth has been slower with 0.5% when comparing 3rd quarters or 2013 and 2014. Fastest growing was Ireland with 15% and Estonia with 13.2%, but Latvia and UK stayed tied for 3rd place with 11.7% increase. All of them, except UK, saw some of the largest drop in house prices in EU after 2008, with Latvian property losing half its value on average.
What we see now is the prices bouncing back up, in Baltics – mainly because of fast growing economies and especially foreign investment. For several years now Latvian state has attracted investors with its residence permits for non EU citizens if they invest in real estate, today its 250 thousand euros in Riga region, but before 1st of September 2014 it was still 150000 EUR. Before the change of law market for houses and apartments costing up to 150k saw unusually high interest from potential buyers mainly from Russia looking to secure the residency for the old price.
Latvian residence permit also allows entering any Schengen country without visa and visa obtaining process for UK and US is made easier. Permits are given for 5 year periods to the investor and their family and in recent years it’s been more than one thousand residency applicants a year. This trend might change because of trouble with Ruble back home in Russia, but as for now it’s been the main factor behind the rapid property price growth in Latvia and especially in Riga and Jurmala, where most of the new development is being built with the idea of selling it to the residency seekers.
This has polarised Latvian society with one side seeing this as a great chance to help economy to recover and create more jobs, others point out that it’s driving up prices and that Latvia is being sold out to foreigners. Nevertheless, we’re definitely set to see bigger rents and house prices here in Latvia and we can only hope it’s not another bubble like last time which we all remember very well.