RIGA - Worse is yet to come for Latvia's wilting real estate market, says Raitis Nespors, executive director of international real estate consultancy Re&Solution, as he points toward late 2008 or early 2009 as when prices could bottom out.
"It is difficult to predict, yet the current situation does not point to any positive changes in the real estate market that could increase its activity," he said.
Nespors notes bank efforts to try to rescue the current market situation through supporting borrowers who have run into problems by providing them with short-term solutions. He says that "The banks are attempting to help borrowers in order for the market not to crash. The banks also don't want to have to sell the mortgaged property."
He didn't commit to forecasting how long the banks will continue to assist borrowers, but added that if activity does not return to the market soon, the banks are unlikely to continue these efforts for too long. "If the banks pull back from helping the borrowers, [home-owners] will face difficulties and will have to sell the property at low prices, increasing the pressure on the price decline," Nespors warns.
He asserts that although real estate prices continue to decline, investors still see real estate as too expensive, so they are staying out of the market, letting prices drop further.
Real estate prices were driven to speculatively high levels on the back of generous lending policies offered by the banks before reversing direction, in mid-2007, when the Latvian government got its anti-inflation program off the ground.
