Rising energy costs and inflation are factors significantly influencing the views of real estate market participants. Transaction prices appear in registers with a time lag measured in months; therefore, to help market participants better navigate the current situation, the company “Latio” compiles five indicators each month in the “Housing Market Confidence Index” that best describe the market situation over the previous month. The most significant news for August is that, for the first time since 2020, there has been a decline in the prices of mass-market apartments. This has been driven by several factors, and it is projected that if conditions do not change significantly, the price decline could continue in the coming months.

Data for the “Housing Buyer Confidence Index”* for August:

32 days – on average, this is how long it has taken to sell a property at the market price (in July – 28 days);

14% of homes were sold within one month of the advertisement being published (in July – 16%);

63% of sellers asked for a price disproportionately high for the market situation (in July – 60%);

4% of buyers offered a price higher than indicated in the advertisement (in July – 7%);

26% of transactions took place without the use of mortgage loans (in July – 24%).

Analysing the market, it can be concluded that, overall, it became slightly more active in August – compared to July, both the number of advertisements and completed transactions increased. At the same time, the number of days taken to sell homes at the market price also rose. This can be explained by both a wider range of supply and the ability of buyers to take more time to weigh their decisions, as well as the concerns of potential buyers regarding upcoming heating season costs and the consequences of inflation, including the current and potential future increases in Euribor. The impact of banking credit policies is also felt, as they have often become stricter; for example, when purchasing a property requiring additional investment, a buyer may be asked to provide an estimate of planned works and confirmation that they have the necessary funds available.

Meanwhile, compared to January of this year, the supply of mass-market apartments in August increased by 58%. The significant rise is largely comprised of large-area properties, often with outdated finishes and which are energy-inefficient. Although buyers are currently looking for the opposite, the supply of new development projects is very limited. In August, only about 624 apartments in new buildings were available in Riga, which is 15% less compared to January of this year. This market situation still allows owners of unprofitable apartments to sell their properties. However, as they are unwilling to lower the price, it has become much more difficult, and without involving intermediary specialists who understand the specifics of approaching potential buyers and how to highlight the best features of a property, it is almost impossible within a reasonable timeframe.

Explaining the developments in the mass-market apartment segment, “Latio” market analyst Ksenija Ijevleva states: “For the first time in two years, we are seeing a price decline for these properties. Although the current overall drop is small – -1% – if the downward trend continues, it could reach -6% by the end of the year. Furthermore, we must take into account the circumstances that may contribute to this – it is known that the supply of apartments in new developments will increase in the next half-year. Several projects will be commissioned, and developers are also planning to open several new bookings. This will undeniably bring its own corrections to the market. Therefore, weighing all factors, it is projected that unless we experience another force majeure situation in the world, these conditions will further encourage the price dumping of illiquid mass-market apartments.”

Assessing the private house segment, it can be concluded that in August, the supply of compact, modern detached houses was still unable to meet demand

“In the active Pierīga region, depending on the condition of the property and the type of heating, private house prices have increased by 5-10% over the year. Although there have often been opinions in the public space in recent months that a large number of natural gas-heated private houses would enter the market before the start of the heating season, this trend is currently not being observed. Quite the opposite – owners of such properties are currently very actively looking for alternative heating methods – this is confirmed both by market experts and the intensity of use of our Energy Efficiency calculator, with people wanting to compare data for their current heating method against other alternative heating methods,” concludes K. Ijevleva, expressing forecasts that the situation could change slightly with the onset of the heating season, as some owners might not manage to carry out system replacements in time. However, this should not significantly impact the market.

Although the number of housing listings rose slightly in August, it has not grown in segments that would be relevant to the majority of prospective buyers. At the same time, buyers are acting more cautiously in their decision-making. This allows the market to become slightly “healthier”, returning to logical market processes and providing opportunities to make grounded future forecasts.
*The index calculation was performed based on data provided by “Latio” transaction managers