Latvia is situated in northern Europe, sharing borders with the likes of Estonia, Lithuania, Russia and Belarus and just over the Baltic Sea from Sweden.  Like so many of the smaller nations in that region, Latvia has recently joined the European Union (May 2004) ensuring an opening up of new trading partners, trading markets as well additional funding from the EU.  This has all had a major impact on the country over the last few years, and seems set to have a further impact for the foreseeable future.

Introduction To Latvia

Historically the country has been heavily influenced by the Soviet Union, although since the demise of the Union new cultural influences have started to have a bearing on the country.  The country itself is only 64,000 km2 in size with a population in the region of 2.3 million.  There was a period of political instability after the fall of the Soviet Union, and while there is still much to do on the political front great progress has been made - ensuring that the country was able to adhere to the strict EU entry guidelines.

The country itself is split up into 26 different districts, and consists mainly of low lands which are covered by trees, lakes and rivers.  The general climate is similar to that of continental Europe, i.e. humid, with temperatures varying from -5 to +15 degrees centigrade. 

The economy of Latvia has been one of the best performing in Europe since 2000, with an increase of 11.9% in GDP in 2006 alone.  After holding steady at just over 8%, the level of unemployment has fallen to nearer 6% although many believe that much of this is down to economic migration, with countries such as the UK and Republic of Ireland reporting a large influx of Latvian workers.  However, if the Latvian economy continues to grow at a reasonable pace, this economic migration will eventually reduce, with the likelihood of many actually repatriating back to the country.

Property Market in Latvia

The Latvian property market has shown quite staggering growth since 2000, further boosted by the May 2004 entry to the EU.  The capital Riga actually posted average property price increases of an impressive 31% in the first half of 2005 alone.  While these kind of growth rates are not sustainable long term, there is every reason to believe that the market will continue to flourish.

Not only did the May 2004 entry to the EU put Latvia on the map, it also opened the gates for a steady flow of overseas investment, as well as a whole host of EU subsidies to improve the infrastructure and other areas of the country which had perhaps been neglected.  The banking sector have also played their part in the boom, offering very attractive mortgage rates, as have the authorities with their grasp of the free market economy - which now allows their European partners to participate in home markets.

One of the most astounding pointers for the future is that mortgages in Latvia only account for some 4% of GDP, against the European average of 48%! This offers potential for massive growth for many years to come, with the government having already announced plans as far out as 2018.

Buying Property in Latvia

When buying a property in places such as Latvia , where the markets are currently moving very quickly, it is essential that you take advice from local experts to ensure you are looking at the correct area of the market.  While the market as a whole is growing substantially, some areas are doing better than other, and these need to be identified for maximum potential.

Unlike many smaller nations in the EU, Latvia have encouraged foreign ownership for some time, with no restrictions what so ever.  However, it is essential that local legal representatives are on hand to look after foreign or expat ownership issues - with the full property purchase legal package costing in the region of EUR 1,700.  For those not currently resident or able to visit the country, a full power of attorney service is commonly used and fully developed.

Common purchase costs (excluding legal fees) include :-

•  Stamp Duty, 2% of purchase price.
•  Loan arrangement fee, 0.5% of loan value.
•  State mortgage duty, 0.1% of loan value.
•  State notary fees, £150.
•  Property insurance, £200

Overall the process is fairly simple, with little real restrictions in place, and the fees associated with a property purchase are very reasonable. Latvia has proved to be one of the more open and forward looking property markets throughout the whole of Europe, which is a credit to the ruling authorities who have managed a change from the heavily communist influences of the past, to a more western style free marker approach.

Future Property Market

The property market in Latvia has already transformed into a two tier market with the capital Riga head and shoulders above any other cities in the country - although there is still a requirement for some 12 million square feet of housing to bring it up to western standards.  However, this pails into insignificance when you consider that millions of the Latvian population are still living in Soviet built tower blocks which have been untouched for decades.  In due course there properties will be replaced by more modern, safer housing which will ensure a buoyant property market for years to come.

The economy is also offering great support to the property market, and this is in the main due to the government’s ongoing embracement of the western free market system.  This is the kind of foresight which gives foreign investors great confidence in the long term potential of a market.  Perhaps the only significant negative point is the massive amount of redevelopment work which has been authorised in the short term.  At some stage this will need to be realigned in, if a more balanced property market is to be achieved.

On the whole Latvia has the potential to prosper for many years to come, and the country’s close proximity to the Baltic Sea offers both useful trade routes, and the potential to attract tourism.  The cheap flight market have already targeted the likes of Latvia as a tourism market with the potential to grow significantly in the short, medium and longer term.  All is currently very rosy in Latvia.