Although interest rates on bank loans in Latvia have dropped from the 8 percent - 11 percent level to 5 percent - 6 percent in a year's time and competition between banks has increased, one cannot yet speak about a mortgage boom, according to experts.
Karlis Litaunieks, lending department manager at Latvian Trade Bank, said at a loan management conference on June 16 that the apartment market was the most active in Riga, adding that it was essentially a secondary market since there are few new multi-apartment buildings being built in town.
Presently one apartment may have as many as four buyers due to greater availability of bank loans and lower rates.
About 15,000 apartments in residential buildings of standard designs are sold in Riga annually. Prices have increased some 50-60 percent recently, although growth has slowed lately to 1 percent - 2 percent per month.
In residential areas outside downtown, apartment prices have reached the peak at $650 per square meter for certain types of apartments, said Litaunieks.
Flats downtown that now cost $800 - $1,300 per square meter will become even more expensive, in his estimation.
As the price per square meter of an apartment in an existing building has actually reached the level of construction costs, about 2,000 new flats may be offered on the real estate market in 2004, said the expert.
This will bring about significant new trends, including reduction of prices on the secondary apartment market, said Litau-nieks.
As of Jan. 1, 2003, mortgage lending in Latvia stood at 238 million lats (359 million euros), or only 11.2 percent of the total credit portfolio of the banks.
In the first quarter of this year mortgage lending increased to 274 million lats, although its share of the overall lending market did not change much.
The Latvian Association of Commercial Banks expects mortgage lending to grow to 450 million lats by the end of this year.