Foreign interest strong in property market

  • 2010-09-01
  • Staff and wire reports

TO THE LOWEST BIDDER: Changes to the Immigration Law have resulted in foreign interest in luxury property purchases.

RIGA - Five requests for residence permits in Latvia based on investments made in the country have been received since the new amendments to the Immigration Law came into force, says an article in the daily Latvijas Avize. The Office of Citizenship and Migration Affairs (OCMA) has already approved two of the applications, while three more are still being processed. Three of the applications were received from citizens of Russia, with one from Ukraine and another from Israel.
OCMA spokesman Andrejs Rjabcevs explained that two of the foreigners applied on the basis of owning real estate in Latvia worth more than 100,000 lats (142,800 euros), while two more applied on the basis of investments of more than 25,000 lats in the fixed capital of a Latvian company. The fifth applicant applied on the basis of investments of more than 200,000 lats in the subordinate capital of a Latvian firm.

The OCMA notes that while the number of applications is small, there is huge interest in the new law, with inquiries received every day from both businesses and private individuals. Most interest is shown in receiving a permit by investing in luxury properties in the Riga area and in Jurmala. Most potential buyers are citizens of Belarus, Ukraine, Kazakhstan and other C.I.S. countries.

Even before the new amendments came into effect, a string of advertisements appeared in the streets of Riga and Jurmala in which Rietumu bank publicized the possibility of obtaining an EU residence permit by investing in Latvia.
According to the bank’s press secretary, Eleonora Gailisa, each day the bank receives an average of ten inquiries related to residence permits. Rietumu bank aimed its advertising campaign in particular at visitors to the New Wave music festival in Jurmala last month, which featured a large number of artists from C.I.S. countries. The bank did not reveal the number of new clients it had attracted, but indicated that the deals were worth several million euros.

Rietumu bank Vice President Vadims Aleksejevs indicated that “We have already received about a thousand serious inquiries. The first clients have already begun the application process for residence permits. They are mainly choosing subordinate deposits - investments in the bank’s subordinate capital.”
The banker indicated that at present, the main benefit to the state from the new amendments was through attraction of resources into the banking sector, which makes up a significant sector of the state economy, providing employment for thousands of people and generating significant tax revenue.

However, according to Aizkraukles bank, not too many hopes should be pinned on the new permit conditions. “Potential clients have other alternatives for finding a way to live in the EU without investing in Latvia - there is also the possibility of quite easily acquiring a multi-entry visa,” indicated the bank’s spokesman, Ilmars Jargans.
The Saeima endorsed controversial amendments to the Immigration Law this past spring, which stipulate that citizens from third countries can receive five-year Latvian residence permits if they invest a certain amount of money in real estate, businesses or banks in Latvia.

Others worry that much of Latvia is already falling into the hands of foreigners.
Although at present the opportunity for foreigners to purchase agricultural and forest land is limited, more and more Latvian property is ending up under the ownership of citizens of other countries, reports In this year’s first half, foreign legal and natural persons have snapped up approximately 15,000 hectares of land, most of which is in the eastern areas, around Ludza and Rezekne.
Agriculture Minister Janis Duklavs has urged the European Commission to extend for three years the existing restriction on agricultural land sales to foreigners.

Currently, the law on privatization of land in rural areas - agricultural land - requires that from May 1, 2004, until May 1, 2011, legal persons of the EU member states have limitations on the acquisition of agricultural land and forests in Latvia. EU member state citizens must for at least three years live and work the land before owning. The law, however, stipulates that land can be bought by companies where more than half the shares belong to natural or legal persons from countries with which Latvia has concluded international agreements on investment promotion and protection.

Latvian farmers, and others, are concerned that when the law expires next year, when the foreign nationals will no longer have restrictions on land acquisition, the Latvian countryside, meadows, fields and forests will be bought up by foreigners, forcing Latvian farmers to lease the land from them.
The Land Registry indicates that in this year’s first half, approximately 14,826 hectares of land, including 1,663 hectares in Ludza County and 1,204 hectares in the Rezekne district, were sold to foreigners.

Investors like to invoke the old adage by the American writer Mark Twain, who said, “Buy land, they’re not making it anymore.” Many Latvians fear that foreigners have taken this message to heart, with the result that this country may soon be owned by foreigners.