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The departing year of 2023 was not the easiest for Latvia's real estate market but wasn't entirely negative either. The influence of geopolitical and economic factors affected purchasing activity and property prices. CEO of Mercury Group, Irina Alazova, shared her expert analysis with Varianti.lv on the real estate market in Latvia for 2023 and the forecasts for 2024.

2023 was challenging. For many Latvian companies in the real estate sector, it was quite tense. However, speaking for ourselves, we and our colleagues have long learned to adapt to constantly changing market circumstances. I've been in the real estate business for three decades and have seen a lot: periods of price and sales growth, as well as declines. The toughest was during the peak of the Latvian real estate market crisis in 2008-2009. The current situation isn't as dramatic. Mercury Group primarily operates in the high-end segment of Latvia's real estate market, and 2023 will be remembered as a good year for us. Most of our turnover comes from leasing clients' houses and apartments – this is the main income, so to speak, the bread of agents. Of course, there were sales as well.

In the past year, we even expanded our team. I won't deny that conducting sales has become more challenging. Real estate agents now need to do more than understand the client's needs, find a suitable property, and assist with the transaction. The range of services has expanded: we have to deal with everything, from selecting a lending bank to structuring the deal, including verifying the legality of the buyer's funds. Almost every sale involves a set of tasks that require non-trivial solutions.

One of the main current negative factors is problems with opening bank accounts for foreigners and making international payments for purchases. If not for this, there would have been more transactions. Interest in Latvian real estate from non-residents hasn't dried up. However, not everyone can solve the puzzle of remittances. Throughout the past year, we've constantly received inquiries from local clients: are there any problematic properties available? People believe that non-residents should start selling their Latvian real estate. However, this isn't happening en masse. Foreign owners see that prices in the segment above average have dropped, and the existing demand is much lower than what the property cost them. Therefore, to avoid recording losses, they prefer to rent out their property and wait for better times when prices return to previous levels. It's important to understand: premium and luxury residential real estate usually weather turbulence more easily. Most deals with it have happened and continue to happen through buyers' own funds. And if someone takes a loan to make a purchase, the amount borrowed rarely exceeds half the property's value. Therefore, the rise in Euribor rates hasn't hit owners of expensive properties so hard. By renting out their property, they incur no losses and patiently await better times.

Regarding demand, we receive many requests for 2-3-bedroom apartments in newly constructed buildings in the center of Riga priced between 150,000 and 200,000 euros. There's not much to offer. Foreigners and locals also inquire about commercial real estate from one to three million euros. They are interested in a yield of 6-7% annually. No one wants to sell such properties. There are offers on the market with a yield of 3-4%, which, in turn, does not motivate buyers.

For the seventh year, Mercury Group has been developing a service for trading foreign real estate. Deals slowed down a bit during the COVID pandemic, but they are active again now. We trade in properties in the United Arab Emirates, Greece, Montenegro, Thailand, Turkey... Some non-residents who had property in Latvia have divested and reinvested their proceeds in other countries. We helped them with this. Having an international direction allows us to look more confidently towards 2024. But what it will be like for Latvia's real estate market depends on how open we become to investments, whether we can create conditions for their inflow. Many countries in the world offer something of their own to attract the attention of international investors. Latvia should follow this path if, of course, we think about development rather than stagnation. Our country has all the prerequisites to become a flourishing, stable, and successful nation, considering its location, natural resources, and culture. We've taken some steps in this direction, but now we've paused. More attention needs to be given to our strengths: diligently working on developing tourism, creating interesting and easy-to-implement conditions to attract foreign investors, reducing taxes for entrepreneurial development, and increasing business transparency, boosting the activity of the transport and logistics sectors, providing a banking system that is friendly to clients. This way, the country will flourish with all the resulting positive consequences in all areas, including real estate.

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