News: Foreigners have purchased properties worth LVL 240 million in exchange for temporary residence permits in Latvia
The real estate market report
The impact of foreigners on the real estate market in Latvia developed by the State Land Service informs that from 2010 to 2012, real estate transactions worth LVL 2.2 billion have taken place in the territory of Latvia, out of which transactions worth LVL 240 million or 11 % of the total volume of transactions have been done in exchange for temporary residence permits (
The report has concluded that the largest amount of foreigners' money has been invested in real estate transactions in the city; however, the level of interest in real estate in Latvia differs between cities. Most of the foreigners' money is invested in Riga – 45 % and Jūrmala – 40 %.
Within this period, natural persons from foreign countries have purchased real estate properties worth LVL 440 million, including properties worth LVL 200 million without requesting temporary residence permits. Most frequently, housing – apartments and private houses – is purchased in exchange for temporary residence permits.
The State Land Service points out that the foreigners' interest in Latvian real estate sustains the development of new housing projects, but at the same time it does not significantly affect the cadastral values of properties.
The foreigners' impact on the Latvian real estate market is currently topical in the agricultural and forest land sector, and the State Land Service has analysed it previously. However, the latest report is focused on the analysis of customers and objects, for example, what is purchased by third country nationals with or without requesting a temporary residence permit and what is purchased by companies registered in Latvia with foreign capital.
Foreigners spend most of their money to purchase apartments – approximately 55 %, especially to purchase apartments in new projects. During the recession, development of new housing projects was stopped. Therefore it can be stated that foreigners, buyers of new projects, saved the project developers by ensuring stable demand.
Currently, the foreigners' interest in new projects in Riga and Jūrmala is so large that many project developers implement their new housing projects focusing only on foreigners.
In both Riga and Jūrmala, the foreigners' money competes with the investments of Latvian citizens in the sector of new housing projects.
Most of the buyers and invested money come from Russia – more than 75 %, followed by the Ukraine and Kazakhstan. According to the opinions of real estate mediation companies and real estate developers, approximately 10 % to 20 % of Russian citizens move to Latvia after receiving temporary residence permits.
The report has examined also the impact of temporary residence permits on the cadastral values. According to the market value definition, the State Land Service has no basis for excluding transactions involving foreigners, including those who purchase real estate in exchange for temporary residence permits.
However, the valid data records and the existing mass appraisal model do not allow to adequately appraise the new, qualitatively reconstructed and exclusive buildings. Therefore the foreigners' transactions in the sector of exclusive and new properties do not affect the cadastral value, and the said transactions are not used to develop a basis for the cadastral values of serial apartments and non-exclusive housing.