PRICE PLUNGE: Apartment prices in Riga have fallen a staggering 50 percent, according to a recent property report, as the country continues to struggle amid one of the deepest recessions in the European Union.
RIGA - Apartment prices in Riga have dropped an unprecedented 50 percent, according to a report by the Global Property Guide.
This plunge is now the deepest in the world in the first quarter of the year as the country's economy slipped into one of the deepest recessions in the European Union.
"Latvia is in surprisingly deep trouble," said the Global Property Guide report. "Average apartment prices in Riga declined an astonishing 50 percent over a year earlier to 747 euros per square meter, with a 30 percent drop during the quarter."
Following a 35 percent drop in apartment prices in Dubai in the United Arab Emirates, Riga apartment prices have fallen 50 percent over the last year along with the economy, which shrank by 18 percent.
The Global Property Guide report ranked Singapore as the third worst performing property market in the world, which recorded an annual decline of 23 percent in the first quarter of 2009. Iceland came fourth with a 20 percent year-on-year decrease.
However, the 50 percent drop in price may not be enough. The recent decrease in salaries and rise in joblessness has added to the ordinary person's struggle to afford apartments and real estate.
A recent report from the Bank of Latvia, "Financial Stabilization Overview", suggests the only way the real estate sector will be revived is if foreign investors are able to buy real estate at the lowest level.
The report also predicts that prices will keep falling in 2009, which may in fact aid in price stabilization of the market by 2010.
Despite the prospect of market stabilization, the drop in price has not affected sales as much as experts and real estate agents had expected and hoped. According to the report, there are still too many factors in the way for buyers to purchase real estate worry-free.
"The buying power increase was not enough of a stimulus factor to bring back activity to the real estate market. The bank's strict credit guidelines together with uncertainty about the future (including even further drops in real estate prices) have made people want to wait to act," said the report.
The report also found the cost of new apartments of poor design was equal to the average price for older standard apartments of the same size.
The report went on to explain that in order to stimulate the real estate market, it was necessary for people to be buying new apartments and ongoing construction of new apartments to take place.
According to the State Land service of Latvia, the average price of a 1-4 room apartment in 2008 fell by 29.6 percent, including new apartments.
