In the segment of premium apartments, in the most active business region – Riga, Jurmala and Pieriga – there were by 15-20% more transactions in 2016 than a year ago, however, transactions in new projects were arranged for prices, which were 10-15% lower than a year ago.
This is confirmed by the research carried out by Baltic Sotheby`s International Realty, which analysed Land Register data about volumes and amounts of transactions closed in the segment of premium apartments (transaction amounts from 150 thousand euro and more) in the most active real estate business region – Riga, Jurmala* and Pieriga.
“In 2016, the segment of premium apartments has finally demonstrated a positive trend, which has not been present since 2010 – this is an increase in the activity of the local population changing the proportion that existed up to now, when almost 80% of transactions in the premium segment pertained to non-residents. As the popularity of a temporary residence permit programme (TRPP) reduces as a result of macroeconomic and political processes, prices of premium apartments are being adapted to the existing demand and the market environment changes as local customers become more active, as well as new customers from Europe, Scandinavia and other regions of the world show up. This is considered a positive trend, as it reduces dependence on foreign market players from one region and prevents potential fluctuations in terms of prices and transactions,” Vestards Rozenbergs, the owner and the Chairman of the Board of Baltic Sotheby’s International Realty explains statistical data.
Līga Kohtanena, the Sales Director of Baltic Sotheby`s International Realty, also confirms that TRPP for investments into property or application for an annual expensive and bureaucratised “golden visa” has become irrelevant for nationals of third countries and therefore East European nationals frequently resolve the matter of property in Latvia either by selling it or also leasing it out by registering economic activity.
In 2016, there were 383 transactions with apartments costing 150 thousand euro in Riga or more or 1.2 transaction with premium apartments per day, 58 transactions in Jurmala and 22 transactions in Pieriga (Marupe, Bergi, Baltezers). The number of premium apartments sold last year in Riga increased by 20-25% compared to the data of 2015.
The most demanded apartments in Riga in this segment were with the area from 90 to 120 m² (2-4 room apartments), which formed 35% of all the apartments, while 25% of premium transactions were related to apartments with the area of 70-90 m².
44% of all the premium apartments sold in Riga were located in the city centre, mainly in new projects, with the average apartment area of 100-110 m² and the average transaction amount of 260-300 thousand euro, L. Kohtanena presents data. “Good examples are Club Central Residence on Baznicas Street, where 85% for apartments with the average area of 80 m² and the average price of the apartment 320 thousand euro during the year, as well as Centrus project at Dzirnavu Street, Felicity apartments at B.Upisa Street and there is one more interesting project away from the active centre – at Sarlotes Street 7, where apartments were sold out during half a year”, the expert lists examples.
The next most demanded region in Riga in the segment of premium apartments was the s.c. quiet centre, where areas of sold apartments were larger than elsewhere in Riga (118 m²), as well as the sales price was the highest: above 300 thousand euro or 2911 EUR/m². The next in the TOP of sales prices is the Riga city centre with the price of 2861 EUR/m², Pardaugava (Kipsala, old Agenskalns, new projects at Liepajas and Kugu Street) – 2433 EUR/m² with the average apartment area of 100-110 m², Vecriga – 2251 EUR/m² and a new region at Skanstes Street – with a price of 2200 EUR/m² and the average apartment size of 95 m².
In Jurmala, prices of such properties may vary from 300 thousands to a million euro, depending on the location, property quality and other factors.
“If we talk about new projects, it is an interesting fact that the prices presented there do not always match actual prices of transactions, therefore, we have observed that transaction prices dropped by 10-15% compared to the previous year. Customers evidently have managed to bargain the price. Local customers invest credit funds, as well as their saving, we see that they are interested, they want to buy such properties, however, the people, who invest pretty large amount of money in purchasing a premium apartment, have specific comfort requirements: the house must be located in a new project or also in a qualitatively reconstructed house, where there is an elevator, storage places, certainly a parking, qualitative management services, a doorkeeper (24/7 guarding and house monitoring service), young families need a green environment (a park) and children playgrounds around the house,” L. Kohtanena explains.
Experts of Baltic Sotheby`s International Realty are convinced that there will be no radical changes in the segment of premium apartments this year, prices will become more logical in the primary and secondary market: because the more investments are made in a property, the higher price it will be possible to ask for that property. However, in 2018, when there are plans to correct cadastral values, the question of total annual maintenance costs of such properties will become even more topical, as they include the immovable property tax, which will most probably grow for such properties. The size of a new tax will certainly influence those buyers of premium properties, who purchased them as investment objects, and although their profitability (from leasing) per year does not reach 10% (around 6% in the best case, it is still more beneficial than a deposit), however, when real estate taxes will grow, this profitability will reduce.
Experts are also convinced that the proportion of customers, when the mood is dictated by a local buyer, will be preserved also in 2017. When talking about the supply in the premium market in 2017, experts mention the new Mežaparka rezidence project, which enters the market on a large scale and with an arranged environment, there is a couple of interesting properties away from the centre – in Imanta, Teika, Purvciems, as well as new projects at Skanstes Street, which are especially topical for buyers, whose budget does not allow to purchase more expensive properties in the active centre or in the quiet centre of Riga.
Favourite regions of Riga in the premium centre: the centre and the quiet centre are still topical, and Agenskalns becomes even more popular thanks to the brushing up of the wooden architecture heritage.
* The data about the activity of transactions in Jurmala do not include properties – undivided shares, which are sold to customers by developers as guest house apartments.