Olga Rudzika, Managing Director of real-estate developer Pro Kapital Latvia told LSM "renting an apartment in the center of Riga has become an almost impossible mission" despite other indicators suggesting it is currently the most affordable of the Baltic capitals.
"Growing demand is indeed a one aspect of it, but there is another side to the story - stagnating supply. Such imbalances can be observed in both the rental and the sales market... not enough apartments are built or renovated in Riga," said Rudzika, describing what she said was a "vicious circle'' of rising prices and falling standards.
"Currently Riga’s real-estate market is in a vicious circle. Construction prices continue to rise exponentially, often even above the level appropriate to the project in question. As a result, real estate projects either compromise on quality or increase prices due to rising construction and material costs. On the other hand, in many cases, solvency has reached the 'psychological ceiling', meaning that people believe even greater price increases are not justified.
"In both cases, either compromising in quality or continuing to raise the prices, the risk that the real estate developer will have trouble selling the property increases significantly. Therefore, many new development projects are put on a hold. As a result, there is not a sufficient number of new projects in the market that would be able to meet the demand as well as the acceptable price level for the buyer," Rudzika said, adding that a growing shortage of suitably qualified construction workers was also worsening the situation.