Latvians rush to buy land and build homes

  • 2003-09-04
  • Girts Grinbergs
RIGA - More and more people are coming to real estate brokers seeking to buy land
and build their own home. After realizing that the hectic city way of life
does not bring harmony and peace, and that more money has appeared in one's
pocket, a person's philosophy changes. He or she is suddenly ready to sell
the apartment in the block house, buy land and, after obtaining the mortgage
credit, to start fulfilling one of life's dreams: life in a private house.
Lately the mass media has been using the word "boom" more often to
characterize the demand for land in Latvia. Real estate brokers can confirm
that the search for land has indeed increased over the past year. Not
surprisingly, heightened demand over the past two years has affected a rise
in land prices.
There are many factors bringing about this massive trend in the real estate
market: favorable credit conditions from the banks, an increase in real
wages, a rapid increase in prices of apartments in Riga's suburbs (in fact,
they cost so much that people have started to consider buying the land for
the same price and building a private house instead).
It is believed that this trend on the land market will continue over the
near two to five years only if Latvia moves toward joining the EU, a
development which would result in improved living standards and more
convenient conditions with respect to mortgage credits offered by finance
Unfortunately, however, large residential building projects in Riga are not
being developed even though investors from both the East and West have
expressed interest in such plans. The first large purchases of land by
foreign investors have already been made.
Indeed, one of the myths causing people to buy land is that the prices after
joining the European Union will increase. But a fundamental rise in prices
is not expected, and the land market will develop only according to demand.
Other countries have experienced similar situations some years ago ­
Portugal did not experience a fundamental rise in prices after joining the
European Union.
Many of us think that the real estate market can change overnight and that
we might wake up in a completely different world, but this is not realistic.
The same situation occurred in Spain, Ireland and Greece, where a
fundamental increase in prices was not observed after joining the EU.
The situation is quite different with respect to land set aside for
commercial use. If after joining the EU Latvia attracts investments for new
industrial plants and office space then a rapid increase in prices can be
Financial institutions have forecast the amount of mortgage credits given to
individuals and published statistics on land being bought for private use.
The data showed that land is being primarily snatched up by young people
between the ages of 28 and 45 as well as young families. The number of
mortgage credits given for home construction continues to increase rapidly.
Apartments are also in demand, but these deals are smaller with respect to
the sum of money invested. While the number of credits given for building
houses is smaller, the amount of money involved is relatively higher.
In the last two months the most intensive construction of new private houses
has been observed in Marupe, a suburb of Riga. At the moment prices for land
there have been fluctuating, but they can reach as high as 15 lats (24
euros) per square meter.
The general situation, however, is that demand for land in the capital, as
well as within 10 -15 kilometers of the capital, is robust. It is still very
popular to buy land in the direction of Baltezers, Saulkrasti and in Bergi.
However, prices are very different in Jurmala, where they can soar as high
as $100 per one square meter. Similar prices are also being asked for land
in Mezaparks.
With demand for land designated for private use increasing, there is another
trend forming at the same time: transforming agricultural land into private
plots for homes. Prices for this kind of land are much higher.
At the start of the summer land prices kept rising in the existing private
house building territories. However, they are currently not being sold as
actively as land costing $10 - $20 per square meter, which comprises almost
85 percent of the land market.
Prices for land plots in the 600-square-meter to 3,000-square-meter range in
Riga and its suburbs are fluctuating from as low as $8 to $140 per square
The highest prices are still being observed in the citadel of Latvian
tourism, Jurmala, as well as in the pine forest region of Mezaparks. The
same demand exists for plots near water and close to other picturesque

Girts Grinbergs is executive
director of Ober-Haus Real Estate