The housing market in the capital has been stagnant for eight consecutive years, with 59% of transactions occurring without a mortgage. In contrast, the market in western Latvia is becoming increasingly active, as highlighted by the latest "Home Buyer Confidence Index" from the real estate agency "Latio." In Liepaja, prices for apartments in the secondary market of new developments have dropped by 12%, leading to a surge in transactions. There is significant interest in purchasing homes in the City of Winds, including from Lithuanians, who often prioritize price when buying older properties, despite the abundance of new developments in nearby Klaipeda. Will Liepaja meet the growing demand for high-quality housing, and how are its southern neighbours addressing their real estate market challenges?

“Home Buyer Confidence Index”* data for July:

• 70 days – on average, it took this long to sell a home at the market price (70 – in June; 75 – in May; 75 – in April; 76 – in March; 76 – in February; 78 – in January);
• 8% of housing units were sold within one month of advertisement publication (9% - in June; 9% - in May; 9% - in April; 9% - in March; 9% - in February; in January – 9%);
• 15% of sellers have asked for a disproportionately high price for the market situation (in June – 17%; in May – 18%; in April – 19%; in March – 21%; in February - 22%; in January – 22%);
• 59% of transactions were conducted without reliance on borrowing (in June – 52%; in May – 55%; in April - 53%; in March – 50%; in February – 46%; in January – 45%);
• - 10%** - it is currently more profitable to rent than to buy a home (in June – 4%; in May – 11%; in April – 11%; in March – 18%; in February – 14%; in January – 14%). Currently, it is more profitable to buy.
• 26% of transactions*** in Riga happened with housing in new projects (in May – 24%; in April – 26%; in March – 26%; in February – 30%).

In July, the supply of apartments for sale in Riga increased by nearly 2%, reaching a total of 4,730 available units. Of the total available homes for purchase, 44% (2,080 apartments) were located in series-type buildings within the capital's neighbourhoods. The number of homes available for rent has remained steady since June, with approximately 2,300 properties on the market. According to "Latio" experts, in June, it was 10% more cost-effective to buy a one-bedroom apartment in a new development with a 25-year mortgage than to rent the same property. As a result, the situation has shifted in favor of purchasing a home over renting in the past two months. Over a third (36%) of rental apartments are located in series-type buildings in Riga's neighborhoods. The average price per square metre of indoor space in these buildings has remained stable, at EUR 1,015 in the neighborhoods and EUR 1,500 in the city centre.

Last month, the number of apartments for sale in Riga's primary market of new projects decreased by nearly 10%, from 1,560 in June to 1,410 in July. Average prices for these properties have remained stable at around EUR 2,800 per square metre of indoor space. In the secondary market, prices for new projects have also shown no change: in Riga's neighbourhoods, the average transaction price is EUR 1,980 per square metre, while in the city centre, it stands at EUR 2,470 per square metre. Despite July being traditionally a holiday season, "Latio" estate agents have not observed any significant fluctuations in market activity. Buyer interest remains strong, but the time to close a deal is lengthy. Buyers using their own funds in home purchase are negotiating assertively, often expecting price reductions of up to 30%, drawing on comparable deals available on the market. Unlike in previous years, this summer has seen significantly lower interest in residential development land, including plots for building detached houses, largely due to the high costs of construction.

In the residential market, transactions most frequently involve properties priced up to EUR 60,000, often purchased using personal funds. In July, nearly 60% of transactions were completed without a mortgage. Conversely, data from Citadele bank shows that most mortgage loans are for amounts up to EUR 100,000. High-quality private homes priced up to EUR 150,000 remain in demand, but the supply is insufficient to meet this demand. On the other hand, the potential costs associated with repairing older, less desirable properties deter buyers. Interest in private homes extends beyond Riga Agglomeration to smaller towns near major regional cities, where prices are generally lower than in more sought-after areas. If buyers secure a mortgage, transactions are typically completed.

The housing market in Jūrmala is currently subdued, affecting all segments, particularly higher-end detached houses and apartments. Typically known for attracting short-term tenants during the warm season, the resort city’s real estate market has shown unusual inertia. Properties in Jūrmala only attract serious buyers when priced competitively, with room for negotiation. In the first half of the year, 70% of apartment transactions, both in the primary and secondary markets, were below EUR 100,000, while just over 2% were priced above EUR 500,000. Two-thirds of all transactions involved series-type and older buildings, with slightly over 30% involving properties in new developments, where two-bedroom apartments are especially in demand.

In contrast, the housing market in Liepāja, another seaside city, is more active, with a gradual increase in transactions since 2022. Last year, Liepāja recorded 1,043 transactions involving apartments, houses, and residential development land, representing a slight decline of just over 13% compared to 2021. In the first six months of this year, there were 458 transactions, with 88% involving apartments. One factor driving buyer interest in Liepāja this year is the decreasing average housing prices. In 2023, properties in new projects averaged EUR 1,640 per square metre, but this year the average price has fallen by 12% to EUR 1,440 per square metre. Most of these transactions occur in the secondary market for new projects. Additionally, the price of housing in pre-1953 "old stock" properties has dropped by nearly 14%, with an average price hovering around EUR 1,000 per square metre. However, prices for dwellings in series-type blocks of flats have slightly increased, now averaging over EUR 900 per square metre.

According to the Liepāja State City Municipality, there is strong demand among local residents seeking for new, modern housing not only within the city but also in nearby villages and suburbs such as Grobiņa and Nīca. Many of these residents work in Liepāja but pay personal income tax in the Dienvidkurzeme District. To meet this demand, the municipality is offering new land plots for individual residential construction at auctions. Additionally, the rise in remote work has led more people from Riga to consider Liepāja as their new home. The municipality is also encouraging families with young children to return to the city by offering rental apartments to those who have lived abroad for over six months. The city's population remains stable at around 67,000 inhabitants. To attract younger residents, the municipality is focused on developing convenient infrastructure, co-financing building renovations, and improving yards of multi-apartment buildings. A key priority is to expand the city’s housing stock with new projects to match growing demand.

“We have planned a new housing district at 138 Klaipēdas Street, which would be home to more than 2000 residents. The site is currently being prepared for auctions. Other plots of land being put up for auction have also been identified, such as 13 Vītolu Street in the city centre. The commercial segment is also booming - Kūrmāja is waiting for its revival with an investment of nearly 30 million, the government is building a new prison for ca.130 million, 14 wind turbines are being built in the northern part of the city, 24 new factories have been opened on the territory of the Liepāja SEZ in 7 years, attracting capital from various countries. A drinking water terminal has been built, and the transformation of the former Liepāja Metalurgs site into a green industrial park has begun," says Mārtiņš Tīdens, Deputy Executive Director for Property Issues of Liepāja State City Municipality.

Lithuanians are among the most active homebuyers in Liepāja, though specific transaction statistics by nationality are not available. Compared to Klaipeda, one of Lithuania's most sought-after seaside cities, housing prices in Liepāja are significantly lower. Klaipeda's primary market for new projects has seen a continuous rise in apartment prices since 2019, with the average price per square metre surpassing EUR 2,800 in the first quarter of 2024. Last year, economy-class apartments in new projects in Klaipeda were priced around EUR 1,700 per square metre, but in the first half of this year, prices have approached EUR 2,000 per square metre. Middle-class apartments have seen a price increase to EUR 2,600 per square metre this year, a 13% rise compared to the first half of last year. As of June, there were 550 apartments available for purchase in Klaipeda's primary market for new projects.

The Klaipeda real estate market has faced several challenges in recent years. While statistics indicate a growing population, a significant portion of new urban residents are Ukrainian refugees who have limited means to engage in the property market. However, this demographic has increased demand in the rental market, often opting for lower-quality housing in older buildings, which sees less interest from the local market. Additionally, there is a noticeable preference for ready-built private homes or new construction. This trend is evident in the transaction data, with the number of detached houses purchased having doubled over the past year, particularly in the suburbs.

Another problem is the inconsistent demand for apartments in new projects.

"Over the past decade, developers have added new, modern residential buildings to Klaipēda's housing segment. Since 2019, there have been over 1000 new apartments provided, with initially positive reactions. However, the number of transactions involving such apartments has been declining over the last three years due to the cost of living, EURIBOR and rising property prices. This, in turn, discourages developers from initiating new construction projects, creating a classic "chicken and egg" dilemma - Should they wait for buyers to commit to purchasing ready homes, or should they offer a broader range of options, including economy-class properties, to better gauge the market demand?" explains Tomas Sovijus Kvainickas, Head of Investment and Market Analysis at Lithuanian real estate agency "Inreal".

Klaipeda is a city with significant potential but lacks a catalyst for accelerated growth. Lithuanians frequently purchase properties in Klaipeda for permanent residence, while opting for summer homes in nearby seaside resort towns like Palanga, Neringa, or Liepaja. Others choose these coastal cities as their permanent residences, adding competition to the Klaipeda housing market:

"Some people seek for lower property prices, some for specific projects that suit their needs better. I think that Lithuanians' interest in Liepāja is due to various factors, including attractive property prices. I doubt that tax differences could be a decisive factor.”

* For residents to be better informed about the current situation in the real estate market, “Latio” publishes the “Home Buyer Confidence Index” on a monthly basis, summarizing the six most descriptive indicators of the market situation over the past month.

** The index is calculated by comparing the potential average monthly mortgage loan payment with a loan term of 25 years in the new projects of two-room apartments with an area of 40-60 m² with the average rental price advertised in July in one of the most sought-after neighbourhoods of Riga.

*** Data on transactions registered in the Land Registry in June.

Additional information:

Rūta Roze
Latio | Market Analyst
E-mail: ruta.roze@latio.lv