Latvia’s property market takes a turn for the worse

Country:  Latvia

22 February 2008

There are fresh signs that the Latvian property market is running out of steam.

The Baltic state has enjoyed exceptionally strong property price growth since joining the EU in 2004. However, the latest Knight Frank Global house price index revealed that property prices across the capital of Riga have begun to fall.

The report states that the price of apartments in some parts of Riga is declining, because significant property price growth simply couldn’t be sustained. This is due to the fact that interest rates are going up, while legislative changes, which affect stamp duty for owners of multiple properties, have been introduced in an attempt to curb speculative investment.

Editor’s comment
Latvia has changed dramatically in recent years, drawing ever closer to Western Europe, both politically and economically, since gaining independence from the Soviet Union in 1991.

Prospects for short-term capital gains in Latvia’s property market look to have been exhausted. However, the country possesses a real chance of adopting the euro over the next few years. This means interest rates in Latvia should fall towards the eurozone level; good news for the country’s property market.