Briefly about the main thing
Latvia is a country that is practically "native" to Russians. Everyone remembers the Soviet past, when trips to the Baltic States became quite commonplace for many. After the country joined the EU, it became even more attractive for moving and buying a "second home". So, thanks to the launch of the program for obtaining a residence permit when buying real estate in 2010, a powerful stream of foreign investors poured into the Latvian housing market, most of which were Russians, and a significant share fell on the Chinese. The maximum demand from our compatriots was directed to the objects of Riga and Jurmala. And it is not surprising at all: after all, the threshold for the official entry into Europe was only 142 000 for Riga and 71000 for buying real estate outside the capital and in republican cities.
However, the situation changed dramatically in 2014, when the Latvian authorities increased the initial volume of investments for obtaining a residence permit in Latvia to 250,000. This led to a sharp decline in the inflow of foreign capital: the volume of investments received by the country's treasury under the investment program failed to break the records of the first four years of its existence (about EUR 1 billion). The Chinese, who were actively buying up real estate in Latvia in pursuit of a European residence permit, have lost their positions.
In general, real estate in Latvia is considered one of the most affordable in Europe, and today about 20% of economy-class housing and almost 70% of the total volume of transactions in the segment of expensive objects (€250 000-300 000) are accounted for by foreigners. According to statistics from the Land Register of the Latvian State Register of Immovable Property, according to transactions conducted in the premium housing segment in recent years, the most sought-after real estate objects continue to be located in the historical center of Riga and in the resort town of Jurmala, and Russian citizens are still considered the most active buyers. They are followed by Ukrainians, Kazakhs and Uzbeks. As for the cost per square meter of housing in the capital of Latvia, prices here start from €550 and reach €5000-6000 in a prestigious area.
The Lithuanian real estate market also shows mixed trends: prices are growing very modestly, demand remains depressed, but activity in the construction sector has jumped sharply. Many experts consider the Lithuanian real estate market to be the most promising of all the Baltic countries. Traditionally, the most expensive facilities are concentrated in the capital: in Vilnius, 1 sq. m. m on average costs buyers in €1352. In Kaunas and Klaipeda, housing can be bought at a price of 957-992 per 1 sq. m, and in the cities of Panevezys and Siauliai, a square costs 539 and 573, respectively.
The situation in Estonia is slightly different. Here, over the past three years, experts have noted a strong and stable growth in residential real estate prices. At the moment, according to experts, this boom has reached its "ceiling", and the growth in value has slowed down significantly. Now real estate in Tallinn costs on average €1555/1 sq. m, in Tartu – €1218, Parnu €935, and on average in the country (excluding the capital region) housing can be bought at a price of €615 per «square ».
How to get there
Moscow and St. Petersburg are connected with all three capitals of the Baltic states by direct flights. So, from Moscow to Riga and back you can fly in 1 hour 40 minutes ("UTair", "Aeroflot", airBaltic), spending a little more than 10 500 rubles. A non-stop flight to Tallinn and Vilnius will take about two hours, and the cost of round-trip tickets will range from 8000 to 15 000 rubles.
The geographical proximity of the Baltic States allows you to get there by land transport, as well as high-quality routes and bus connections are established between our states. A trip on a comfortable Ecolines bus from Moscow to Riga (14 hours 30 minutes) will cost about 3000 rubles. The flight from Petersburg to Riga will last more than 12 hours and will cost travelers 2,000 rubles. Moving from the Northern Capital to Tallinn will cost even cheaper - a little more than 1000 rubles per person.
Current situation in the Latvian real estate market
By the end of 2016, the Riga real estate market recorded the highest price increase over the past nine years - on an annual basis, the prices of economy-class housing in the Latvian capital increased by 9.75%. A square meter in the city center now costs about €1200-2000, and in general «secondary » in the neighborhoods of Riga costs €703 per sq. m.
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The largest Baltic real estate agency Ober-Haus provides the following statistics:
Secondary market apartments in residential areas of Riga cost €550-1000/1 sq. m. New apartments in the same residential areas are sold at a price of €1200-1800. «Secondary » in the center and in the Old Town costs €900-3600, here prices for new buildings vary within €1700-4000 per «square ». As a result, for the whole of 2016, the maximum number of real estate transactions in Riga was made in the field of purchase and sale of apartments in Soviet-era block houses, where 1 sq. m on average costs €600-800.
Activity in the Latvian real estate market remains moderate, as buyers' incomes are growing at the same pace as housing prices. According to experts, in 2017 the cost of housing in Riga will increase by 4-6%. However, the Latvian real estate market is not limited exclusively to the capital. Outside Riga, housing prices are also rising. So, in Ogre, the greenest city in Latvia, thanks to the many parks and forests, the cost of housing in 2016 increased by 7.5%, reaching the level of "euro;477 per "square". In Kauguri, a popular residential area in the western part of Jurmala, and in Salaspils, a city famous for its military history, prices for the year increased by 12.4% to €470 and €530 per sq. m. m respectively. In Jelgava, a hospitable town on the banks of the Lielupe River, housing can be purchased at a price of about €400 per sq. m.
Primary economy-class housing in Vilnius (Lithuania) costs €1000-1400/1 sq. m, new middle-class buildings are sold for €1500-1900, and prices for elite segment housing start from €2000 per «square.
In Estonia, prices for the capital's secondary and primary housing in the residential areas of the city vary between €1000-1600 and €1500-2200 per 1 sq. m. m respectively. The cost per square meter in the historical center of Tallinn is €2000-5000.
Advantages for buyers
- Perhaps the main distinguishing feature of the Latvian real estate market from other Baltic countries is the opportunity to obtain a residence permit. To do this, you need to buy real estate, residential or commercial, with a cost of 250,000 (in peripheral cities of Latvia, several objects can be purchased for this amount).
- The main conceptual difference between Latvia and other Baltic countries is the huge number of Russian-speaking population and the presence of really elite real estate in Riga and Jurmala. International business activity, as well as the largest and most beautiful historical center, consolidate Riga and Latvia's leading positions.
- Real estate in the Baltic States has always been considered attractive for investment, it was purchased for subsequent rental. So, the apartment has an area of 40 sq. m. m in Estonia is able to generate income of about €380 per month. In Latvia and Lithuania, each "square" can bring monthly from €6 (an old apartment in a pre-war building in Latvia) to €9-10 (in the center of Lithuanian Vilnius). The average rental yield of a real estate object in Latvia is 4-5% per annum, in very rare cases 7-10%.
- If the buyer does not have the opportunity to pay the entire cost of housing in the Baltic States with their own funds, then you can resort to a mortgage loan. Thus, for mortgage payments in Latvia and Estonia, non-residents will have to overpay about 5.5-7% per year, while in order to apply for borrowed funds in Lithuania, a residence permit is required, which immediately puts an end to the desire of non-residents to acquire local housing on loan.
The most interesting regions for investment
The interest of foreign investors in real estate in Latvia mostly focuses on Riga and Jurmala. The most prestigious objects of the capital are concentrated in the center and in the Old City. New apartments in the central part of Riga cost from €1700 per 1 sq. m, and prices in exclusive projects reach €5000-6000 per «square. Based on the fact that 1,250 new apartments were commissioned in Riga in 2016 and another 1,500 are planned to be commissioned in 2017, current buyers have and will have plenty to choose from. The greatest demand in new buildings in Riga is for two-bedroom apartments with an area of 60-70 sq. m, and "two-bedroom apartments" with an area of 50 "squares". In the buildings of the pre - war period inIn the central part of the city, potential buyers are most often looking for apartments with an area of 50 to 80 sq. m, renovated, two or three separate rooms, in the price range from 80,000 to 100,000. If there is no elevator in the building, then investors' interest is limited to the three lower floors.
Those wishing to purchase a separate house concentrate their attention on the suburbs of Riga, in the price range up to 150 000. There are many interesting houses at a price of 40 000-65000 in Ogre and Ikskil, and with a price of up to 100 000 in the municipality of Kekava.
In the residential areas of Lithuanian Vilnius, new buildings are sold at a price of €980-1700 per «square ». At the same time, it is worth considering the local peculiarity that new housing in Lithuania is rented in rough finishing, that is, additional funds should be allocated for leveling floors, painting, lighting and plumbing at the rate of 200-300 per 1 sq. m. Approximately new housing (about 50 sq. m.) will cost buyers from 50;000 and about another €10 000 will be required to make the new building habitable. Housing in faceless typical buildings of the Soviet period in the sleeping areas of Vilnius costs €47 000-58 000. In the most prestigious suburbs of Vilnius, Antakalnis, Zverjas and Valakampiai, housing is sold at a price of €1500-2100 per sq. m.
Individual houses (150-200 sq. m. m with a plot of land) in new residential areas of Vilnius or within the city limits (10-20 km) are sold at a price of 110 000-165 000 and also in rough finishing, while prices for spacious houses in the most prestigious areas of Vilnius reach 1-2 million. The cost of adjacent houses and townhouses varies between €95 000-125 000. Other major cities of Lithuania (Kaunas, Klaipeda, Panevezys and Siauliai) attract mainly residents and are not in great demand among Russians.
In Tallinn, the capital of Estonia, both primary and secondary market facilities are equally interesting. The old housing stock of the historical part of the city attracts with good views, prestige of the area and unique architectural style. Here, housing prices reach, and sometimes exceed, 3000 per sq. m. The secondary market in the residential areas of Tallinn, although not distinguished by the originality of buildings, attracts relatively low prices of 1000-1300/1 sq. m. In turn, new buildings bribe thrifty investors with their energy efficiency (with smaller payments for heat), however, such housing initially costs more: €1500-2200 in residential areas and €2300-5000 for a primary object in the city center. In popular suburbs such as Pirita, Nimme and Kakumae, prices for modern apartments range from €1800 to €3000 per sq. m.
Those who like to live in detached houses, in addition to Tallinn, prefer the volosts of Viimsi, Rae, Harku. There are new houses (new buildings or housing not older than 5 years) with an area of 130-180 sq. m. m with modern technical solutions and an energy-efficient heating system cost €170 000-250 000.
Subtleties of the purchase and sale process and additional costs
Foreigners can freely buy and sell real estate in Latvia (with the exception of agricultural land and forest land), provided that the object was purchased separately from the land on which it is located. The purchase of land by a non-resident is carried out only with the consent of the municipality, however, no legal prohibitions are imposed on foreigners for long-term lease (up to 99 years).
Additional costs that a buyer of real estate in Latvia should be prepared for include the need to pay a state duty (2% of the value of the object) and a notary fee (0.10% + 21% of the amount of the fee as VAT).
In Lithuania, also with the exception of agricultural land, there are practically no restrictions on the ownership of land by foreigners. The costs (notary and registration fees) accompanying the purchase and sale transaction do not exceed 1% of the value of the object.
In Estonia, foreign citizens and companies can purchase real estate with the permission of local authorities. Plus, there are formal restrictions on the acquisition of agricultural and forest lands with an area of more than 10 hectares, but in the eyes of Russians such investments have never been a priority. Also, foreigners, including Russians, cannot acquire land on compact islands and in certain territories adjacent to the Russian border.
The additional costs that fall on the shoulders of the buyer of real estate in Estonia are 2.5-5.5%. This includes commission to the realtor, notary fee, state duty and registration fee.
Taxation of real estate
In Latvia, real estate that is used for entrepreneurial activity is taxed in the amount of 0.6-1.5% of the cadastral value of the object. In the case when the property is used exclusively for personal residence, a progressive scale of taxation is applied (from 0.2%).
The current rate on real estate in Lithuania ranges from 0.3% to 3%. For individuals, real estate tax is levied at a single rate of 1%, and the tax base is the value of the property exceeding 290 000.
A distinctive feature of the Estonian real estate market is the absence of an annual property tax. Instead, the owners of objects (apartments, houses, townhouses, apartments) pay a land tax, the amount of which depends on the region and varies from 0.1 to 2.5% of the cadastral value of the land.
Portal HomesOverseas.ru thanks for participating in the preparation of the article by Alexander Runts (Old Town Estate) and Dmitry Timofeev (LATVIO).
photocredits: flickr / dmitry kruglyak
Olga Shoshina
