Real estate market hopes for EU entry

  • 2001-05-03
  • Lauris Rinmanis
RIGA - Businessmen from Latvia, Poland, the U.S.A., Hungary and Bulgaria came together to discuss Latvia's real estate market at a conference on April 26 in Riga.

The conference outlined Latvia's real estate market in its current position as well as its future as part of the European Union.

Mark Beesley, vice president of the Baltic-American Enterprise Fund, has been working in the Baltics in recent years.

"Latvia has everything that is necessary to have a real estate market. It has appropriate laws for buying, recovery of property, it has a land booking system to record the actions and ownership, it has lending, both commercial and mortgage, also insurance and valuation and broker systems are active. They are in different phases of progress and are still developing and fueling the market," said Beesley.

Latvia's real estate market is diverse and includes various factors such as privatization, social conditions and also "local communities' understanding of real estate," said Vilis Kess, the real estate department head of the Latvian state-owned mortgage bank Hipoteku Banka. "Regional mortgage pricing has ample diversity due to the local business climate. Land price per hectare varies from $200 in Latgale to $800 - $1000 in Zemgale."

A common topic was future EU membership for Latvia.

"The real estate market would accelerate and prices on certain types of property would increase. The EU also could be helpful in developing all regions equally, because Latvia at the moment is not capable of that," stressed Kess.

He was convinced that EU funds will flow in and the state will participate in the market.

Other speakers disagreed.

"With EU membership, activity in the real estate market will increase, but it will not be answer to all questions," Beesley said. "It will not create large demand. Demand will be enlarged by producers, not EU. Increased foreign investment is coming, because some demand is there, but it should be fostered," he added.

Other speakers agreed that Latvia's EU membership will not be the answer. "You can see on various examples, when Spain and Portugal have developed tremendously. On the other hand West Germany has pushed a large amount of money into East Germany and still a large gap is visible," said Chris Benett, chairman of the real estate company DTZ Zadelhoff Tie Leung Central and Eastern Europe, Hungary. "The property market requires capital and you can't persuade people to go where they don't want to. EU wasted a lot of money on it," he stressed. "You have to give reasons for people to come here, develop infrastructure, catch up with things necessary for the market. One drawback is that the Baltics are a small market. Riga will never create a market of large international significance. And the problem is lack of domestic investors, because in order to reach international market a local market must be developed first," said Benett.

The government should be involved in the development of the real estate market, the speakers agreed. "The government should help in developing the market," Beesley said. "Estonia has a better solution. When you are building a new house the government automatically takes responsibility of the roads attached. It lowers building costs and is seen as major help by builders," he stressed.

Malgorzata Zieba of the Cracow University of Economics shared the experience of Poland in the development of the real estate market. "Poland has a lot of obstacles like Latvia has. Taxes to lower, zoning maps to create, bureaucracy to get rid of, because it certainly doesn't attract investors. We have problems with reprivatization where the ownership is not clear, so any transactions are impossible. Because of bureaucracy large investments are kept out."