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Everything you need to know is included in our Latvia Property Pack
Are you thinking of investing in property in Latvia? Are you wondering if it's more advantageous to buy at this moment or defer until next year?
Market timing is a subject where people have different perspectives. The Latvian real estate agent you know might advise you that now is the opportune time to buy property, while your childhood friend from Riga may suggest exercising more patience before making a decision.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Latvia, we facts and data that are backed by evidence, not just opinions or rumors.
We have collected and examined all the official reports and statistics from government websites. Based on this extensive research, we have compiled a complete and reliable database. Here's what we discovered, which can assist you in deciding whether now is the right time to purchase real estate in Latvia.
Let's get started!
How is the property market in Latvia these days?
Latvia remains, today, a very stable country
Positive
Stability should always be the leading factor to consider when you want to invest in real estate because it minimizes risks and provides a secure foundation for your investment. It is an information you need as a foreigner who might buy a property in Latvia.
You most likely already know that Latvia is widely known for its remarkable stability. The last Fragile State Index reported for this country is 41.4, which is an impressive number.
Latvia's stability is largely attributed to its strong integration into European and transatlantic structures, such as the European Union and NATO, which provide economic support and security guarantees. Additionally, its commitment to democratic governance and economic reforms has fostered a resilient political environment and steady economic growth.
Stability check done. Now, it's time to review the economic forecast.
Latvia is poised for strong growth
Positive
Before investing in Real Estate, assess the stability of the country's economy.
As projected by the IMF, Latvia will, in 2024, grow by 1.7%, which is positive. Regarding 2025, the experts say 2.4%.
The pace will even accelerate since Latvia's economy is expected to increase by 10.4% during the next 5 years, resulting in an average GDP growth rate of 2.1%.
The expected sustainable growth rate in Latvia indicates a stable and growing economy, which can lead to increased property values and rental demand over time. For someone investing in real estate, this means a higher potential for returns and a more secure investment environment.
That said, GDP growth is just one piece of the puzzle!
Latvian business owners have a neutral outlook towards market conditions
Neutral
It's worth considering the GDP forecast, but it's important to remember that it's created by an international organization (the IMF), so it may not fully reflect the opinions of Latvians regarding their local economy Luckily, in Latvia there is an official metric that is regularly reported. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a metric derived from surveys and assessments of business leaders, indicating their confidence in the current and future economic conditions.
The Central Statistical Bureau of Latvia reports that the Business Confidence Index has reached a value of -3 for Latvia. It is definitely a small score.
There hasn't been significant change, considering that the BCI score, 12 months ago, registered at -4.
The minimal level of business confidence among local businesses in Latvia could impact individuals seeking to purchase property. This situation might lead to a stagnant property market, characterized by decreased investment and slower growth in property prices. Prospective buyers may find fewer available properties and face difficulties in locating motivated sellers or securing suitable financing options.
Latvia is dispensing a lot more building permits
Positive
When considering whether to buy property in a country, it's worth taking note of the number of building permits issued. A rise in the number of building permits being issued demonstrates faith in the property market, pointing towards a positive trend.
We have excellent news to share with you: the number of building permits delivered is booming in Latvia.
Over the last 12 months, according to Central Statistical Bureau of Latvia, the number of building permits issued by the Latvian municipalities rose by 20.3%, from 3,387 to 4,076 units.
Definitely, the data tells us that many people believe it's a favorable time to invest in real estate.
Keep in mind, however, that the domestic market will see an increase in the availability of real estate. Taking this into account, there is a chance that property prices will drop in Latvia in 2025.
Latvian property market shows sustained and exponential growth
Positive
Latvia's home prices have increased by 56.6% in 5 years according to eurostat.
It means that if you had bought a city apartment in Riga for $400,000 five years ago, then it would now be worth around $626,000.
Recently, the Latvian property market has been characterized by a consistent and increasingly rapid growth trajectory, with property values and market activity continually on the rise.
If you're thinking of buying a property in Latvia, it's a good sign. The market is active and getting stronger. However, you might want to wait a little longer for prices to go down before making your investment, so you can get a better deal.
You can find a more detailed analysis of the real estate prices in our property pack for Latvia.
Everything you need to know is included in our Latvia Property Pack
Latvia's population is getting richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Latvia, the average GDP per capita has changed by 8.9% over the last 5 years. It's a solid number.
This means that, if you purchase a stylish apartment in Riga and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in Latvian cities like Riga, Daugavpils, or Liepāja in 2025.
Rental yields are not crazy in Latvia
Neutral
If you're wondering if a property investment will make money, consider the expected rental yields.
Rental yield is the percentage of the property's value that you can expect to earn in rental income each year.
According to Numbeo, rental properties in Latvia offer gross rental yields ranging from 2.8% and 5.5%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Latvia.
It means that the income potential from a real estate investment is relatively moderate.
Moreover, as we have seen before, there might be a fall in property prices (due to an increase in supply) and more wealthy tenants. Consequently, gross rental yields will probably climb in Latvia in 2025.
Everything you need to know is included in our Latvia Property Pack
In Latvia, inflation is expected to be minimal
Neutral
Inflation is the erosion of the value of money.
It's when your customary cup of Riga Black Balsam costs 4 euros instead of 3 euros a couple of years ago.
If you're contemplating investing in a property, high inflation can offer several advantages:
- Property values have a tendency to increase over time, potentially leading to capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
As projected by the IMF, over the next 5 years, Latvia will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
This data shows that Latvia will likely experience almost no inflation. If you buy a property now, you may experience lower appreciation potential and reduced returns on investment.
Is it a good time to buy real estate in Latvia then?
Now it's time to draw our conclusions.
2025 is shaping up to be an excellent time to buy property in Latvia, and there are several compelling reasons for this. First and foremost, Latvia is known for its stability, which is a crucial factor for any real estate investment. The country's economy is on a promising trajectory, with an expected growth of 10.4% over the next five years. This translates to an average GDP growth rate of 2.1%, indicating a robust and expanding economy. For potential property buyers, this economic stability and growth suggest that property values and rental demand are likely to increase, offering a secure and potentially lucrative investment opportunity.
Moreover, Latvia is actively issuing more building permits, which is a positive sign for the property market. This increase in construction activity suggests that the market is not only growing but also adapting to meet the rising demand for housing. As the property market shows sustained and exponential growth, investors can expect a dynamic environment with plenty of opportunities. This growth is further supported by the fact that Latvia's population is becoming wealthier, which typically leads to increased demand for quality housing and, consequently, higher property values.
For those interested in rental properties, Latvia offers attractive gross rental yields ranging from 2.8% to 5.5%, according to Numbeo. These yields are a good indicator of the potential returns on investment in the rental market. As the economy continues to grow and the population's purchasing power increases, the demand for rental properties is likely to rise, making it a favorable time for investors to enter the market. The combination of stable economic growth and attractive rental yields makes Latvia an appealing destination for real estate investment.
Lastly, Latvia's inflation is expected to remain minimal, which is another positive factor for property investors. Low inflation helps maintain the purchasing power of money and ensures that the real value of rental income and property investments is preserved over time. This economic environment provides a sense of security for investors, as it reduces the risk of unexpected costs and helps maintain the value of their investments. All these factors combined make 2025 an opportune time to consider buying property in Latvia, whether for personal use or as a strategic investment.
We hope this article has offered you practical support!. If you need to know more, you can check our our pack of documents related to the real estate market in Latvia.
-Will real estate prices go up in Latvia?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.