Are Baltic property markets under threat?

Country:  Estonia

5 September 2008

Property markets in the three Baltic States of Latvia, Estonia and Lithuania could plunge further into depression, amid fears of military attack from Russia.
 
The US has called on Nato to prepare to defend the three Baltic States from military attack, following Russia's recent invasion into Georgia.
 
The three Baltic republics have changed dramatically in recent years, drawing ever closer to Western Europe, both politically and economically, since gaining independence from the Soviet Union in 1991.

They have been among the most outspoken members of Nato and the EU in taking a tough stance on Russia's action in Georgia. However, like Georgia, the three countries all have ethnic Russian minorities that Moscow insists it has the right to protect.

"These countries are members of Nato; so if there is any attack on those countries we will all respond," said Kurt Volker, the new US ambassador to Nato, in an interview with the Financial Times.
 
Residential markets in Lithuania, Estonia and Latvia have witnessed significant growth in recent years, following the country’s positive transformation and the introduction of less constrained mortgage finance.
 
However, property prices have taken turn for the worse over the past year. A recent report from Knight Frank reveals that average annual property prices in Latvia have fallen by 24.1%, while prices in Estonia and Lithuania have depreciated by 16% and 9.9%, respectively.