However, real estate brokers deny noting any significant flurries of interest among Russian and Ukrainian citizens shopping for property ahead of a September 1 rise in the threshold of minimum investment required for obtaining a residency permit from the Office of Citizenship and Migration Affairs (PMLP), reports Latvian Radio (LR) Wednesday.
In line with the PMLP’s reported increase in the number of Russians and Ukrainians applying for residency permits in Latvia this year, real estate experts do believe there has been a greater interest owing to the instability and insecurity in their home countries.
Aigars Zarins, who heads the property brokerage Balsts, told LR “as soon as the Ukraine crisis began, there was an immediate growth of interest from Russian non-residents. They don’t understand where the politics are going, what will happen, whether the war will continue, and of course they’re looking for a safer place,” he said.
Zarins did note a particularly intense flow of house- and apartment-hunters just now during the New Wave festival, which attracts crowds of well-heeled travelers from CIS countries to Riga and Jurmala for a week. How many of them actually will put down deposits and close on a property he did not venture to say.
Real estate firm Latio director Edgars Sins believes most of the property shoppers seeking residency permits in Latvia do not plan to live here permanently. It’s sooner an investment in case of “unexpected events.”
“We haven’t seen a rapid increase in the flow of inquiries or changes in market dynamics. I think the foreigners have understood that the option has become twice as expensive in Latvia, and they’re stepping back to think it over,” Sins suggested.
Zarins concurs with his sector colleague, however noting a trend where the number of transactions in the Land Registry is down by 2%, compared with the previous period, yet the issuance of residency permits increased by 43%.
This means that more buyers are receiving residency permits for an entire extended family. According to PMLP data, residency permits were issued in a proportion three times the number of applications received.
About 80% of residency permit seekers choose to invest in local real estate.
“I personally see the problem in that the local consumer buys up to €100,000 and over €200,000, while the average cost of a residency permit was €150-180,000. What happened? It created a market segment. People have invested in real estate, perhaps fixed it up, now as of September 1 that segment will be cut off,” said Zarins.
Sins agrees that the reduction will be significant.
However, Economics Ministry parliamentary secretary Ilona Platonova recalls that this was precisely the goal of the lawmakers.
“Monitoring the situation, the MPs decided the number of permits being issued was too high and we do not wish to regularly let so many people into Latvia. That’s why these amendments were proposed and I’d say it was a prudent solution – rather than quota-setting, the threshold was raised. We looked into how many transactions over €200,000 there have been, and we came up with only a few hundred last year. That means after the amendments are passed the number of transactions should fall quite considerably,” she explained.
In addition to meeting the new minimum threshold, buyers will have to pay a 5% fee assessed on the price of the property. Because properties of this value are practically only found in Riga and its near vicinity, the revenue is planned for diversion to develop other territories in Latvia. According to Economics Ministry estimates the sum could amount to €9m annually.