The housing market in Latvia is still strong, but this year’s economic growth is predicted to be significantly slower than usual due to Russia’s ongoing invasion of Ukraine.
According to data from Arco Real Estate, apartment prices in Riga, the capital of Latvia, increased by 17.9% to €967 (US$1,017) per square meter in April 2022 from a year earlier. This is a significant improvement over the previous year’s meager growth of 0.24%. It was the largest year-over-year growth rate seen in a decade.
However, after accounting for inflation, the y-o-y increase in apartment prices in April 2022 was only 4.37%. Due to high inflation, the Covid-19 pandemic-related supply chain disruptions, as well as the ongoing Ukraine crisis, there is a significant discrepancy between nominal and real figures.
The national inflation rate in Latvia in May 2022 was 16.9%, which was the highest level in about 13 years.
The high-end city center housing specialist Ober Haus claims that average apartment prices in Riga increased by 11% in 2021 after falling by 0.9% in 2020.
Latvia’s housing boom and bust
After 2007, Latvia experienced one of the largest housing market collapses in history. After rising by almost 700% from 2000 to 2007, house prices started to decline in the second half of 2007, and inflation shot up.
Between the start of the global crisis in 2008 and the end of 2010, the economy shrank by about 25%, making it the deepest depression ever recorded globally. Despite Latvia receiving a €7.5 billion standby loan from a group led by the European Union (EU) and the International Monetary Fund, unemployment increased from 6.1% in 2007 to 19.5% in 2010. (IMF).
The bailout avoided a complete economic meltdown but was accompanied by strict austerity measures. The nation’s fiscal deficit exploded, capital fled, exports declined, and domestic demand plummeted.
Apartment prices decreased by 5% (-16.7% in real terms) from the previous year in 2007.
Apartment prices fell by 30.5% (-37.1% in real terms) in 2008. y-o-y
Real estate prices fell by 41.3% in 2009, or another 42%.
Apartment rents hike
According to Latio, the average monthly rent in Riga for two-bedroom apartments in new construction in the Center increased by 10% to €605 (US$632) in 2021. Rent for 2-BR apartments in the left bank communities of Genskalns, Imanta, and Ziepniekkalns ranged from €430 (US$449) to €545 (US$569) per month. Rents in new projects in the right bank neighborhoods of Purvciems, Markavas, and Pavnieki ranged from €370 (US$386) to €430 (US$449) per month.
Latvia’s housing market is still strong, but economic growth this year is expected to be slower than usual due to Russia’s invasion of Ukraine.
According to data from Arco Real Estate, apartment prices in Riga, the capital of Latvia, increased by 17.9% to €967 (US$1,017) per square meter in April 2022 from a year earlier. This is a significant improvement over the previous year’s meager growth of 0.24%. It was the largest year-over-year growth rate seen in a decade.
However, after accounting for inflation, the y-o-y increase in apartment prices in April 2022 was only 4.37%. Due to high inflation, the Covid-19 pandemic-related supply chain disruptions, as well as the ongoing Ukraine crisis, there is a significant discrepancy between nominal and real figures.
Sample prices
The cost per square meter for existing apartments ranged from €700 to €1,500.
Prices for new apartments ranged from about €1,800 to €4,700 per square meter, with the highest prices being in the Old Town and city center of Riga. Apartment costs in high-end developments can go up to €7,000 per square meter.
