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Latvia is a true emerging economy in property investment terms with massive scope for development, for an increase in overseas and local market sector interest, for growing rental yields and for increasing underlying property prices.  This is our country guide to Latvia for overseas property buyers.

Latvia, located on the shores of the Baltic Sea and bordered by Estonia and Lithuania is a country blessed with an abundance of natural and historical landmarks - from amazing rivers to breathtaking castles.  The capital city of Riga is also the country’s cultural capital and it offers a vibrant and eclectic mix of modern and ancient with stunning old buildings housing state of the art banking and investment houses and young students and visitors happily whiling away the hours in the bars, cafes and museums in the city’s old quarter.  The country is attracting growing numbers of tourists and professional expatriates as its profile is raised and business opportunities in Latvia increase.

Having joined the EU back in 2004 and now well on track to join the Euro zone in the near future, Latvia has started to transform its economy from the one paying the lowest wages in Europe to a country on track for one of the top five largest wage increases in the world. 

Latvia began life in the European Union at such a low economic level that it immediately became an attractive market for vertical foreign direct investment from international businesses seeking the cheapest economies from which to operate.  The government of Latvia were astute enough to recognise that vertical FDI cannot equate to long term economic stability as those who seek the cheapest economies are quick to withdraw investment when the economy they are feeding from has strengthened sufficiently and other countries then offer lower overheads and costs in real terms.

As a result the government of Latvia have succeeded in creating an attractive long term economic opportunity to overseas investors and the direct result of this is a steady boosting of sustainable horizontal foreign direct investment into this Eastern European country. 

Financial services, retailers and telecommunications companies in particular have established permanent foreign enterprise bases in Latvia creating permanent employment opportunities and bringing permanent direct investment into the country.  This means that the roots for long term economic development and success in Latvia have been firmly planted.

This is fundamental to the long term prospects of the investment property market in Latvia, because for there to exist room for growth in the market the demand for real estate has to be strong and local purchasing power needs to keep growing.  Latvia is an attractive country for tourism, but in terms of reselling residential real estate, a current property buyer’s future customer is most likely to be a local resident whose purchasing power has increased.  As wages increase, GDP rises and borrowing remains cheap in real terms in Latvia, the local people are gaining wealth and financial status and they are beginning to demand and afford property for purchase across Latvia.

Overseas property buyers are now flooding the Riga real estate market in particular and snapping up renovated pre-war properties as these offer the greatest current rental yields achievable - with average residential rental yields already a healthy 8 - 9% in the country’s capital - and also the most attractive properties for long term resale opportunity.

In terms of restrictions placed on foreign buyers in Latvia, the government have to approve those who seek to purchase swathes of land - otherwise restrictions are few and the property buying process is straightforward and affordable.  Investors buying property are also attracted by the fact that there is no capital gains tax payable on the resale profits made from property as long as property has been held by the investor for at least one year.  Profits from rental income are only taxed at 25% and all loan interest and property renovation, improvement and maintenance costs are tax deductible making the environment for property investors in Latvia highly attractive.

The government’s long term commitment to boosting the Latvian economy has paid dividends since 2000 - literally.  GDP was up by 6.1% in 2002, 7.2% in 2003 and 7.6% in 2004 and when translated to the fortunes of the property market this has resulted in average property price increases of 20% in 2003, 25% in 2004 and up to 40% in certain parts of Riga in 2005.

The demand for commercial and residential property is growing as more foreign businesses are establishing new bases in Latvia and international and local employees flock mainly to the commercial hub of Latvia, namely Riga.  Property investment opportunity in the capital city exists in abundance and those looking for the emerging market within the emerging market are now examining real estate investment opportunities along the coast and in-land.  Latvia has massive room for growth and the country is doing everything it can to achieve its long term, sustainable economic goals thus creating a healthy long term opportunity for overseas property buyers and investors.

Sources and copyright: http://www.amberlamb.com/index.php/property/latvia/