ARCO REAL ESTATE

    In August 2009, in comparison with July, the price decreasing is evaluated as insignificant – the prices of standard-type apartments in Riga decreased in August by 1,2 %. It permits to conclude that in fact price inflexions for apartments in Riga are not certified. Consequently, it is possible to speak about the continuation of price stabilization. It should be also taken into consideration that in the previous summer months the same there was fairly small activity on the real estate market. In the separate housing estates is observed completely insignificant price decrease (0,7%; 0,8%). In comparison with the previous month, the number of proposals remained the same. This circumstance is also evidence of price stabilization. Accordingly, by this moment nothing also witnesses about the price increasing in the nearest future. There also continues the price equalization between different standard-type apartments, the same as for 1-rooms apartments in different housing estates.

    The average price of a standard-type apartment in August decreased to 488 EUR/m². Thereby the prices were on average lower by 69.9 % than on July 1, 2007, when the average price of a non-renovated standard-type apartment was 1620 EUR/m². For its part, in comparison with January 1, 2009, the average price of a non-renovated standard-type apartment reduced by 47,8%.

    In housing estates of Riga, comparing the prices of August 2009 with the prices of July 2009, the highest price decreasing was observed in Mežciems (-4,8%), like in July. In its turn the smallest fluctuation of average price in August was ascertained in Iļģuciems (-0,1%).

    Due to the price decline in the recent two years, the standard-type apartment prices in Riga housing estates in August 2009 had already been lower for 69.9% than those were in the beginning of July 2007 and for 47.8% comparing with the prices in the beginning of 2009.

    Māris Laukalējs, ARCO REAL ESTATE member of the board, head of appraisal department: „The last months give the opportunity to conclude that the prices for standard-type apartments start to be stable, although there was still insignificant decreasing -2,8% in July and -1,2% in August. The total tendency witnesses that the considerable price decrease in the nearest months is not expected. 

The price decreasing rates are low this year, in separate housing estates the prices even increased, but also the offer is increased. Taking into consideration the fact that the data is not long-term, it is unable to speak about the tendency. However it seems that in the future mouths the rate of price decreasing could be comparatively low – 2 till 3% per month.

Taking into consideration price decreasing rate and stabilization of proposal number, it could be possible to forecast the insignificant price increasing. However, these forecasts could be possible just till the moment when the government made the decision about the real estate tax integration.

In point of fact, real estate tax is not only the effective tax for the improvement the situation with budget income, but also the serious real estate market regulating factor.  On the background of boomed real estate value this tax rate increasing assists to „soap bubble” effect removal.   In its turn, during the period when the market is in stagnation phase, the decreasing of tax rate could assist the activation of real estate market as the branch of economic sector.

Unfortunately, similar to the approved taxes and charges by the government during “anti-inflation” program, also the integration of this tax is being approved now in absolutely inappropriate situation.  Nowadays and at least next year the real estate market will be still passive with the descending prices in its various segments. Accepting the real estate tax in this situation will more freeze the real estate market. But the most important is that the property owners will have no possibility of choice – having no possibility to pay the tax they even will not be able to sell the property for any appropriate price.

If the tax approval is inevitable and is determined by some external factors, then approving it there should be paid attention to the tax rates and determine it according to inhabitants paying capacity and real estate sphere development stage. It means that the tax rate in the nearest years should be absolutely symbolic for the real estate where the most part of Latvian population lives, in its turn to define so called progressive tax rate for the property of value, for example, starting from 150 000 LVL.

Wherewith, the further development of state tax politics substantially influences on the stabilization of standard-type apartment weak market segment. As the result of it slow price decreasing in amount of 1-3% per month will continue at least till the moment of tax approval.