In August 2022 there was a drop in prices of standard apartments – prices decreased by 1% when compared to Q2 of 2022. This kind of drop has not been seen on the market since 2020, according to representatives of real estate company Latio.
The price of standard apartments was 1 122 EUR/m2, whereas in Q2 2022 it was on average 1 136 EUR/m2.
The price drop was influenced by several factors, and it is expected that it may continue in the coming months if nothing changes. By the end of the year the price drop may be around 6%, Latio representatives say.
The company also reports that in August an average of 32 days were necessary to sell housing for market price, whereas in July the average was 28 days. 14% of apartments were sold within a month’s time since the publication of offers. In July 16% of apartments were sold within this term.
Latio experts concluded that in August 64% of sellers requested disproportionately high prices (60% in July), and 4% of buyers offered paying more than the real estate offer required (7% in July). In August 26% of deals were performed without loans (24% in July).
Analysing the market, Latio experts concluded that the market became slightly more active in August. Compared to July, the number of offers and completed deals increased in August. At the same time, there has been an increase for the number of days within which housing is sold for market price. Latio explains this with wider range of offers and buyers’ ability to spend more time making up their mind, as well as potential buyers’ concerns about costs of the upcoming heating season and consequences from inflation, including existing and possible Euribor increase.
Loan policies of banks also have an impact. In most cases they have become more strict. For example, if residents want to acquire property, they have to provide additional investments,
banks may ask them to present a plan for reconstruction or repair, as well as confirmation the client has enough to afford it, Latio representatives say.
Compared to January, the number of standard type apartment offers increased by 58% in August. The increase mainly came from large properties, often without and energy efficient or modern finish. Although buyers are looking for the opposite, the number of new projects on offer is minimal.
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In August there were approximately only 624 new project apartments available in Riga, which is 15% less when compared to January 2022. Latio representatives say that this market situation still allows owners of unprofitable apartments to sell their property. This is more difficult to do within reasonable terms without reducing prices and attracting mediators that know how to work with potential buyers and how best to outline the selling features of apartments.
As for the novelties on the standard type apartment market, Latio market analyst Ksenija Ijevleva said for the first time in two years there has been a price drop for these properties. Although the drop is small (1%), it may drop as far as 6% if prices continue going down.
Ijevļeva stresses that it is important to keep in mind conditions that may contribute to it – it is known that the number of next year’s offers among new project apartments will increase next year. Several pieces of real estate will be commissioned. Additionally, developers plan to open new reservations, which will definitely bring corrections to the market. She also predicts that unless another force majeure is observed in the world soon, this situation will contribute to further price dumping of unprofitable apartments.
Looking at the private houses segment, Latio concludes that in August the offer with compact, modern houses was not enough to satisfy demand.
In active Pierīga, depending on the state of property and heating method, prices of private homes have increased by 5-10%. Although in recent months there have been opinions reported on the public space that a large number of private homes heated using natural gas should end up on the market before the heating season, this trend is not observed as of yet, said Ijevļeva.
If anything, owners of these properties are actively looking for alternative heating methods. This is confirmed by both market experts and the intensity of residents using Latio Energy Efficiency Calculator. Residents want to compare their existing heating method with alternatives, said Ijevleva.
Although the number of offers on the real estate market did show an increase in August, it has not increased in segments interesting for the majority of buyers, said Ijevļeva.