-
Observations of ARCO REAL ESTATE show that in September 2014, when the amendments to the Immigration Law came into force, the number of transactions with apartments in the city centre decreased significantly (-57%). Looking at the changes in the number of transactions by the price range, it is evident that the greatest reduction was observed in the price range of 140 000 EUR - EUR 150 000, and in September, an unusually large number of transactions in this price range was not seen. In September, the number of transactions in the amount of up to 140 000 EUR decreased by 36%, but in the amount of above 140 000 EUR - by as much as 83%.
When evaluating the changes in this segment in the autumn months of 2014, the prices of apartments located in the city centre, decreased by 0.3% compared with October, maintaining a negative trend for the third consecutive month. The total price decrease in the autumn months of this year constitutes 1.20%, while the average price of apartments in the centre of Riga in November fell to 2088 EUR / m², as stated in the Riga City centre apartment market overview prepared by ARCO REAL ESTATE.
Price fall in the autumn months was mainly caused by the shrinking demand, which took place in the result of coming into effect of the amendments to the Immigration Law. This in turn led to diminished interest from the part of non-residents who, through the acquisition of property, wanted to secure the possibility of obtaining a temporary residence permit, because the new 250 000 EUR minimum threshold was too high, explains Mr. Māris Laukalējs, a Member of the Board of Directors of the Company.
Also the fact that the most significant price decrease (-2.16%) concerned apartments in very good condition, shows that the Immigration Act amendments served as the main reason for the price decline. Since most foreign nationals wanted to buy a property with a good interior decoration for immediate living, without additional time and financial investments, apartments of this quality class were most demanded in the non-resident sector.
The expert expects that taking into account the circumstances and causes of the price decline, it is expected that a gradual price adjustment would continue. An increase of the number of transactions depends on the speed of adjustment of supply to the changes having occurred in the market.
The Old Town was the only part of the city centre where in the autumn months there was observed increase in prices (+0.69%). This can be explained by the fact that the demand for apartments in the city centre part has historically been more stable. Being aware of the fact that supply of housing of historical value is currently limited, the prices in the Old Town were less exposed to different market conditions. Also the fact that the value of a large part of the Old Town properties has achieved the threshold of 250 000 EUR threshold may be considered as a significant price increase, so that therefore the Old City was less exposed to the impact of amendments to the Immigration Law.
18.12.2014.