Riga v Moscow

[nickinberlin]

Hi all - judging by the stratospheric property prices in Moscow (and to a lesser extent Saint-Petersburg),is it fair to assume that in due course Riga - boasting a majority Russian population and being a safe EU haven - can follow the same trajectory, with a two-tier market - exSoviet and Premium? Russian buyers are active in Riga - with the barrel at $115 and considering that Moscow's square meter is at €15,000 (which beggars belief),isn't Riga on the way to do the same? Some developments (on Wagnera and the Da Vinci project) are already nearing €10,000! Comments welcome...

 

[propertastic]

You are too late into Riga. It was the fastest growing market in Europe in 2005 and 2006.

By the end of 2006, prices were higher there than in Stockholm, Copenhagen and Oslo.

It all stopped in March 2007 though when the government put restrictions on borrowings to stop the rapdly overheating economy. It did the trick as it became practically impossible for anyone to borrow money without providing a lot of paperwork (which most people in the market for buying EUR250,000 properties weren't able to provide.

Since then, prices have been falling there by 2-3% per month.

Exactly the same thing happened in Kazachstan as well.

 

[nickinberlin]

You are too late into Riga. It was the fastest growing market in Europe in 2005 and 2006.

By the end of 2006, prices were higher there than in Stockholm, Copenhagen and Oslo.

It all stopped in March 2007 though when the government put restrictions on borrowings to stop the rapdly overheating economy. It did the trick as it became practically impossible for anyone to borrow money without providing a lot of paperwork (which most people in the market for buying EUR250,000 properties weren't able to provide.

Since then, prices have been falling there by 2-3% per month.

Exactly the same thing happened in Kazachstan as well.

well that's exactly my point about a two-speed market!

i disagree slightly - prices have been falling by 2-3% a month for the post-war soviet series, many at the periphery of the city, and for low-quality builds in zolitudes, purviciems, etc. but prices are holding for quality new builds around the new centre and in kliversala/kipsala (the old town is a different story - it's a micro market within the city). new developments are fetching record high prices and seem to attract interest from russian buyers - some of them at nearly €10,000 per square metre. the irony is that with a freeze on new builds, existing ones are very much in demand if the location and quality justifies the price tag!

i have been buying property in riga since 2005 & despite the current turmoil i still find the fundamentals really good. the fact that prices are higher than in stockholm is not a valid indicator of how far the market can go - moscow is more expensive than paris. i was in riga last week and what i saw is strong rental demand that is lifting yields to attractive levels (in 12 months i have passed a 20% rental increase onto a tenant),a 25% yoy wage increase that has eroded the cost of property and many buyers sitting on the fence. there's a sense that after a correction affordability factors are favourable again and that if it wasn't for cautious lenders (primarily nordic banks) the market could be ready for take-off again.

 

[nickinberlin]

well that's exactly my point about a two-speed market!

i disagree slightly - prices have been falling by 2-3% a month for the post-war soviet series, many at the periphery of the city, and for low-quality builds in zolitudes, purviciems, etc. but prices are holding for quality new builds around the new centre and in kliversala/kipsala (the old town is a different story - it's a micro market within the city). new developments are fetching record high prices and seem to attract interest from russian buyers - some of them at nearly €10,000 per square metre. the irony is that with a freeze on new builds, existing ones are very much in demand if the location and quality justifies the price tag!

i have been buying property in riga since 2005 & despite the current turmoil i still find the fundamentals really good. the fact that prices are higher than in stockholm is not a valid indicator of how far the market can go - moscow is more expensive than paris. i was in riga last week and what i saw is strong rental demand that is lifting yields to attractive levels (in 12 months i have passed a 20% rental increase onto a tenant),a 25% yoy wage increase that has eroded the cost of property and many buyers sitting on the fence. there's a sense that after a correction affordability factors are favourable again and that if it wasn't for cautious lenders (primarily nordic banks) the market could be ready for take-off again.

for info, the government restriction on 10% deposits has been lifted this week, even though for practical purposes it has now become a bank rather than a government-imposed requirement. eventually the government as also decided to back the construction of a new architectural landmark to host the new national library - it's been on hold for years - in kliversala. there's really a sense that even in a subdued market, this whole area of riga opposite the old town is poised for a serious upmarket transition.

 

[alexft]

Dear Nick,

Riga will never become Moscow not Moscow ever become Riga. Russian capital is home to many tycons, and american, european expats. Riga can be viewed as one of many rich russians holiday places. Not a main residence.

Passing 20% rental increase in one year, no wonder people in Riga dislike property investors lol Still well done

Yes Riga is a nice spot however who are your buyers? Local salary there arent high. People borrowed a lot now banks` money are tight, no more cheap loans. Who will you sell to? Just curious here.

Tell us more about fundamentals you referring to.


Regards,

Alex

 

[nickinberlin]

Dear Nick,

Riga will never become Moscow not Moscow ever become Riga. Russian capital is home to many tycons, and american, european expats. Riga can be viewed as one of many rich russians holiday places. Not a main residence.

Passing 20% rental increase in one year, no wonder people in Riga dislike property investors lol Still well done

Yes Riga is a nice spot however who are your buyers? Local salary there arent high. People borrowed a lot now banks` money are tight, no more cheap loans. Who will you sell to? Just curious here.

Tell us more about fundamentals you referring to.


Regards,

Alex

Well, Jurmala can be viewed as a holiday place for wealthy Russian holidaymakers (with prices to match - many developments are more expensive than in Riga itself) but not Riga. So I'm prepared to agree that exit strategy is critical there, like it is on the coast in Bulgaria but not so much in Riga, which has slowly developed the arsenal of a European city: a fast growing middle and entrepreneurial class.

I have a problem with straight comparisons because they're misleading but what exactly is the affordable price per square metre? It looks like we're looking at the Eastern European population as a monolithic bloc. Average salaries in Riga have topped €700 - not much but keep in mind that 50% of French salaries are below €1,500. Spain is even worse - teachers are paid €800 a month. So what's an affordable median price for Riga? €15,000 per sqm like in London or Moscow? €10,000 like in Paris? €2,000 like in Brussels? Riga has a broad ange of properties, from ex-Soviet to new builds & it has enough of an emerging well-off class to sustain a few central high end developments - not so much of the €10,000/sqm variety like in Moscow but of the €3-5,000 type - for local residents.

Funnily enough, since many planned developments have stopped, the ones that came up in 2005-06 seem to hold their value well!

 

[Jay900]

Well, Jurmala can be viewed as a holiday place for wealthy Russian holidaymakers (with prices to match - many developments are more expensive than in Riga itself) but not Riga. So I'm prepared to agree that exit strategy is critical there, like it is on the coast in Bulgaria but not so much in Riga, which has slowly developed the arsenal of a European city: a fast growing middle and entrepreneurial class.

I have a problem with straight comparisons because they're misleading but what exactly is the affordable price per square metre? It looks like we're looking at the Eastern European population as a monolithic bloc. Average salaries in Riga have topped €700 - not much but keep in mind that 50% of French salaries are below €1,500. Spain is even worse - teachers are paid €800 a month. So what's an affordable median price for Riga? €15,000 per sqm like in London or Moscow? €10,000 like in Paris? €2,000 like in Brussels? Riga has a broad ange of properties, from ex-Soviet to new builds & it has enough of an emerging well-off class to sustain a few central high end developments - not so much of the €10,000/sqm variety like in Moscow but of the €3-5,000 type - for local residents.

Funnily enough, since many planned developments have stopped, the ones that came up in 2005-06 seem to hold their value well!

I think €1400-1800 sq-mt is more realistic for local residents. The average salary stats are very misleading due to the huge gap between rich and poor.

 

[rayk150]

real prices

I think €1400-1800 sq-mt is more realistic for local residents. The average salary stats are very misleading due to the huge gap between rich and poor.

yes you got to aim for the prices the local people are paying in this market, the city already has boomed, local buyers are buying in the price range of 1,300-1,800 sqm as said above, also this is a much bigger market unlike the much smaller market for rich, you got to sell in time to a local for a reall price not the hyped up price for the rich.

 

[TJRealty.eu]

It's flattering that you are even comparing Riga to Moscow, but unfortunately the prices were not sustainable and are currently in a nosedive. The economy is also in a bit of a crisis, with consumer expenditure on luxury goods record low and inflation running at 20%. There is currently a wave of reposession - mostly from poor and leveraged-out speculators who were running a dangerous game of lending 500% of equity of their purchases.

The good thing is that there are currently possibilities to purchase nice property at foreclosure auctions at 50% off the market price and if you are willing to purchase an apartment in Jurmala (beautiful!),it's a good time to get a good discount from the developers.

 

[splash]

Latvian nightmare!!

I purchased a 1 bedroom new build apartment in Riga, unfortunately, in deep so had to complete, but at the same time it was always a long term investment. Anyway, my point being that I have now been quoted 200LVL per month as a rental income in what I believe to be a well built, quality development (I have building/property experience). I find this very hard to swallow that the rental market has been hit this ferociously and am looking at other rental companies, Doe's anyone know of a reputable company to handle this or are they right in their estimates?

Your help would be much appreciated!

Jason

 

[goldcard]

Where in Riga is the flat? Rental incomes vary widly between districts. Take a look at dzivoklis.lv to get an idea of rents in your area.

 

[Jay900]

I purchased a 1 bedroom new build apartment in Riga, unfortunately, in deep so had to complete, but at the same time it was always a long term investment. Anyway, my point being that I have now been quoted 200LVL per month as a rental income in what I believe to be a well built, quality development (I have building/property experience). I find this very hard to swallow that the rental market has been hit this ferociously and am looking at other rental companies, Doe's anyone know of a reputable company to handle this or are they right in their estimates?

Your help would be much appreciated!

Jason

Hi,

I'm English and have been renting in Riga for a few years. Market forces have seen my rent decrease from 350 LVL to now 250 LVL per month. The banks stopped lending over a year ago and the market is massively oversupplied with new builds.

Your rental value depends in which part of the city it is located, whether it's furnished and is it on the ground floor or upper levels? You can send me the property details and I can let you know current rental prices.