Has anybody any update on the market in Riga at the moment? How long is the current "correction" going to continue? I am wondering when we can expect to see some good growth again and is it worth considering selling. Have any buyers successfully sold their property recently?

I've discussed this with various agents who advise that the sales market is weak at the moment therefore continue renting until we start seeing steady growth.

Would be good to hear some views and experiences...

Hi Jay,

I saw an article about global house prices, and unfortunately, Latvia was at the bottom of the list, with falls of around 38% year on year, after adjusting for inflation.
Poland was not featured in the list. Interestingly they report growth in Bulgaria - this must include Sofia. I think the drops on the coast must be gathering pace, as holiday makers put their properties up for sale, like the Spanish Costas.

I think the PS advice all those years ago, about avoiding holiday resorts was good advice, and stick to the cities and focus on local markets.

The end of the global house price boom
http: / /www .globalpropertyguide .com /investment -analysis /The -end -of -the -global -house -price -boom

Chris.

Hello,

The answer is that nobody can be sure how long the correction will last - that includes economists, property developers and agents. The most optimistic position is that the dip will bottom out later this year and stablise. On a more positive note, residential developments have all but ceased with many developers re-designing projects for commercial purposes as they run for the next gold rush.

My advice is if you can afford to - hang on to your property for another 1 - 2 years - if you can get a price for it equivalent to the valuation last June then SELL!

I would generally agree with Andy.

Hopefully the market will stabilise in the next 6 months. This will be when the supply of new units into the market begins to dry up and/or there is perceived to be value again in the lower prices.

Once buyers are active again in the market, that's when i'll be looking to sell. There's no point in selling now, unless you really need to! I sense that, from an economic perspective, there's too much of a hangover from the boom years to make it worthwhile hanging on for a longer term upturn in fortunes.

If it does pan out that way (and who knows!) then probably those who bought in the first half of 2006 and earlier could still be in for a worthwhile profit.

Alex

Absolutely no point in selling now unless you cannot cover your costs, which would be surprising given the buoyancy of the rental market in Riga.

Take the long term view: Poland, Romania and Bulgaria are hot on the heels of the Baltic experience. To extrapolate, the Baltics are likely to be the first ones out of this particular storm.

Don't take the accepted rhetoric of the recent past too seriously. Those who appear to have an understanding of the situation are often proven wrong.

Thanks All for your interesting views. The fact is even if somebody wanted to sell now it would be pretty difficult as there is hardly any interest from buyers. Although it seems sensible to rent bear in mind that rents don't generally cover mortgage costs in Riga...so natuarally I am wondering without price growth what am I doing here!

Nic, might I ask who you are using to let your Zundas unit? Unfortunately mine has been vacant for over 2 months and I am beginning to panic.

Jay

In some ways this is a good time to buy because current oversupply issues will soon become an undersupply issue since developer have put most developments on ice. Also developers are willing to cut prices to shift the units they have.

Hi Jay,

I'm sorry to hear about your short term difficulties. In my experience Zundas has been a popular rental due to its central location. More peripheral developments have been struggling a bit but a well priced (300-400Lats/month for a studio/one bed) centrally located unit such as yours should rent.

Have you tried Ober-Haus?

All the best,
Nic

Thanks Nic, just got confirmation that my agents have secured a tenancy.

On another note they also said that last week Latvian banks announced that they will remove the minimum deposit rule which was introduced to cool the market. If this is the case then I think we can look forward to a healthy sales market and good price growth as locals should become active again.

HI Jay,

That is correct, the banks are removing this minimum deposit agreement. However this is not to be taken as a sign of renewed buoyancy, the removal of this legislation was agreed months ago.

If I were you I would stick with your tenants for 1 - 2 years and increase rental charge every 6 months if they are on short term contract, with the aim of hitting break even point on the flat as quickly as possible.

If you are signing a 1+ year contract with the tenant, ensure the rental agent links rent to inflation - i.e. you should expect a circa 15% increase in rental income per annum as a minimum position.

Andy