The extent to which prices for Latvian residential property will depend on the economic situation, The Baltic Course writes.

A reduction in GDP and economic activity will result in lower real estate prices in Latvia in 2020.

This was stated at the webinar of the Latvian Real Estate Association (LANIDA) by the Starlex Investment partner Auseklis Sarkans.

According to him, it is necessary to take into account the inertial response: the economic situation produces a delayed effect on the housing market. A drop in real estate prices in Latvia should be expected in a few months.

At Arco Real Estate, they believe that Latvian real estate prices will decline by 3% at best and by 10% at worst.

“If the world and the Latvian economic situations improve in the summer or in September, the drop in prices in 2020 will be within the range of 3-5%. If the crisis lasts until the end of this year, the prices can fall by as much as 10%. It is absolutely certain that we will not see price increases this year,” said Māris Laukalējs, an Arco Real Estate Board member.

“The segment of serial apartments is likely to experience the greatest price decline,” the expert assumed. “In the Latvian capital, prices for these Soviet-built apartment blocks began to stagnate in the summer of 2019. At the same time, prices for land plots for private development in top locations will remain stable.”

According to Sarkans, the liquidity of real estate objects plays a decisive role. Quality objects remain highly marketable even during the crisis.

Now, the number of real estate transactions in Latvia has decreased due to the wait-and-see attitude of buyers and difficulties in the registration of a purchase (banks and notaries are less accessible, and the Land Register offices are closed). In the future, a decline in the number of transactions will be caused by the economic situation and not the restrictions imposed due to the quarantine.

“The house rental market has also changed,” a Starlex Investment partner Valeriy Kommissarov says. “Owners offer for a short-term rental of 3-4 months quality apartments which they used to lease to tourists through Booking.com and AirBnB. Such apartments can be rented for 300-500 euros per month, excluding utility bill payments.”

This trend has a negative impact on the price level in Old Riga and in downtown. The supply also grows driven by corporate housing apartments that compete with economy-class flats. At the same time, tenants began to ask for discounts because they lost their jobs.