An increasing number of Estonian real estate development companies are operating in the Latvian market because land in Riga is significantly cheaper and planning approvals can be obtained more quickly, reports ERR News.
Although real estate prices in Latvia have risen by 51% over the past five years, the average property price remains much lower than in Estonia; consequently, Estonian developers are increasingly turning their attention to Riga.
Elar Ollik, Head of Partnerships at Luminor Bank, explained that the appeal of Riga’s real estate market lies partly in the fact that new projects still account for a relatively small share of the total housing stock, meaning developers see greater potential there. He noted that this is particularly evident when comparing the situation to Tallinn, where the market is sometimes described as saturated with apartments in new developments. Another factor is that the planning process in Riga is faster—and time is money. From a banking perspective, borrowing capacity in Latvia is also seen to be increasing, making new projects more viable. Ivo Volkov, CEO of Merko Ehitus, stated that the Latvian real estate market does not differ significantly from Estonia’s, with similar market conditions applying in both places. The state of the real estate market reflects the current well-being of the population, which in turn depends on consumer confidence and the economic situation. Notably,
consumer confidence in Latvia has been higher in recent years than in Estonia.
Despite this, real estate prices in Riga remain lower than in Tallinn. According to Ollik, this situation has arisen because Riga’s housing stock contains a significantly higher proportion of buildings constructed during the Soviet era. While Tallinn also has a substantial number of Soviet-era buildings, many have been renovated, thereby increasing their value; in contrast, there are fewer renovated buildings in Latvia.
Estonian real estate developers Invego and Reterra are jointly developing a new residential complex in Riga with an investment of 40 million euros. One key reason why the Estonians have turned their attention to their southern neighbor is the lower level of bureaucracy. Kristjan-Thor Vähi, CEO of Invego, stated that the time required in Latvia to develop a detailed project and obtain a building permit is up to three times shorter than in Estonia. Estonians have reportedly created bureaucratic barriers for themselves. During meetings with the Mayor of Riga and the Prime Minister’s advisors, he was told that the only way to catch up with Estonia and Lithuania is to act quickly.
Reigo Randmets, CEO of Reterra, added that in Latvia, a building permit can be obtained within a few months, whereas in Estonia, the process can take years. He noted that Riga’s appeal is also driven by low costs—land is inexpensive, allowing developers to purchase property and begin construction. However, selling in Riga is more challenging because purchasing power in Latvia is lower.
Read also: Estonia rejects EU plan for mandatory EV charging stations in parking lots