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The prices of projects located outside Riga, depending on the interior decoration level, are in the range from 500 to 1100 EUR/m2
Construction of new apartment houses in the vicinity of Riga not expected in the nearest five years
In connection with improvement of the economic situation, despite the poor demographics, there is a demand for new housing in Latvia. Taking into consideration that young families are an expressed target audience as to purchase of apartments in new projects, their willingness and ability to buy real property is limited by several factors. To ensure competitiveness of a project for this target audience, there are certain significant aspects that play an important role: the price, bank financing, environment, functional layout, operating costs, and infrastructure. A typical property that meets these requirements is as follows: a bright 3-room apartment, with total area of 65 m², a balcony of 5 m², bank financing of up to 90%, a large, green and well-kept area near the house with a children's playground, not far from kindergarten, school, shops, public transport etc.
The biggest demand is, of course, for new housing in the most popular housing estates in the city of Riga, where the largest part of the active and working population in Latvia is concentrated, and in view of the fierce competition and limited supply, which now promotes the growth of prices in this segment, a great alternative is to buy an apartment in the new projects located in the territory of the former Riga District, especially in the most developed regional centres, such as Mārupe, Baloži, Salaspils, Ādaži, Inčukalns, Ķekava, Sigulda, Olaine. All of the above sites are within 50 km from the centre of Riga and have a developed infrastructure, in particular, good public transport links, making it possible to combine a working place in Riga with the choice of place of residence outside the city.
“A competitive price is the key determinant of the decision to buy a home outside of Riga. If the average price of a home in the economy class new projects located in housing estates of Riga is from 950 to 1500 EUR/m², the prices of projects located outside Riga, depending on the interior decoration level, are in the range from 500 to 1100 EUR/m2”, informs Ms Ieva Jansone, Sales Department Head of ARCO REAL ESTATE.
It should be added that currently the construction of new projects in the considered area is not particularly beneficial to developers because of the high construction costs (about 800-1000 EUR/m²), so the supply consists of new projects built in previous years that are currently being returned in the market by the banks or their subsidiaries. A pleasant exception is, for example, a multi-apartment building in Ūbeļu Street 13, Ādaži. Several entrepreneurs acting together purchased the building from the bank, after which they finished interior decoration works and launched 123 new renovated apartments in the market. In Salaspils, the company Maijava (a company related to NCH Corporation) has acquired at auction a new building located at No. 17, Griezes Street. After having worked hard to improve the building, they offer now 30 apartments for sale available both with complete interior decoration, and with the “white” interior decoration degree, at the customer's choice. Also some banks (their subsidiaries), having analyzed the demand, have come to the conclusion that investors and developers do not stand in line to buy the seized new projects in whole, and therefore perform in interior decoration works and / or other improvement works these projects and offer the homes to customers. The company Ektornet (Swedbank) has the largest offer. Salvus (DNB) offers apartments located in Baloži and Olaine. Those banks that have failed to make specific improvements in the seized projects, despite the competitive price offer, may not be proud of high sales results, as customers have become more educated and demanding in terms of quality of real estate and anticipated risks. For example, it seems very attractively to purchase a property – a 3-room apartment with area of 90 m², with unfinished interior decoration, for 800 EUR/m², which is a very competitive price per m². However, the final price will be the same as for a three-room apartment with a smaller area and complete interior decoration, but a higher price per m². In the first case, it will be necessary to invest additional funds in interior decorating, and pay higher utility bills for large living space.
“For apartments of economy class, completion of interior decoration is a conditional priority. However, in some projects, we can see that the people in the vicinity of Riga willingly buy apartments with the “white” interior decoration degree and then after the purchase carry out internal renovation by own resources. However, if you desire to get as much funding from the bank as possible, it is better to choose a home with complete interior decoration, because its value (the value is determined by a certified valuator; the price may differ slightly from the value) will be higher, and the bank can finance a higher amount of the appraised value (up to 90%), as well as after the purchase you can begin to use your home instead of performance of long-lasting renovation works”, says Ms I.Jansone.
Equally important for purchase decision-making is the environmental factor. The mentioned localities offers the same primary set of necessary infrastructure (schools, kindergartens, shops, public transport, recreational and cultural centres, etc.) as Riga while at the same time there are more opportunities to use and enjoy the benefits offered by the environment (fresher air, forests, waterways), which is particularly important for families with young children or enthusiasts if an active lifestyle.
In terms of layout, the most demanded apartments are two-bedroom apartments with a living area ranging from 60 to 75m². The most economical are 2-bedroom apartments with areas ranging from 45 to 60m². Supply of 4-room apartments with the optimal area of up to 100m² is small. One-room (studio) apartments are not very demanded among the potential target audience, as evidenced by several apartments in projects located in the vicinity of Riga that have been freely available in a long period of time.
Summing up, we can conclude that this is the most suitable time to buy a new home in the vicinity of Riga by buying it below fair market price (subject to the high current construction costs), because the supply of housing of this type is rapidly shrinking, and construction of new facilities, most likely, is not expected in the next five years.
Additional information:
Ieva Jansone
Head of the Sales Department of ARCO REAL ESTATE, Member of the Board of Directors
Tel. 2911 811
07.05.2013.