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Buying a Property in The Baltics

Investment potential

The Knight Frank Global House Index for the first quarter of 2006 cited that house prices in Estonia rose by an impressive 17 per cent – making it the fastest growing property market in the world at the time. Since then, prices rises have slowed and even started to come down as international buyers become scarcer, global credit flows slow down and the oversupply of property in the cities takes hold. In Tallinn however, investors can still expect to see rental returns to range between four and seven per cent.

Latvia has perhaps suffered some of the worst drops in property prices of all of the emerging markets since their peak level in April 2007 – some figures put the drop since then at up to 45 per cent in Riga. The trouble of the finance and banking sectors has caused a degree of chaos in the housing market, and as the economic struggles have now spilled into the political arena, further instability could be on the cards in the future. However, some will see the drop in prices as a blessing for the future of real estate in Latvia, bring prices down to more realistic levels and offering a little more value to buyers when they are attracted back into the market.

There was a similar story in Lithuania, as prices peaked in early 2007 and then began to fall back. Average price drops have been around 29 per cent when the higher rate of inflation in Lithuania is taken into account. GDP growth is still continuing in the Baltics, although at a much slower rate than was previously the case, but it is difficult to make a case for short-term investment in the property market at the present time.

Health and education

No vaccinations are required before travelling to the Baltic States, but ensure that you take out comprehensive medical insurance as, while the private health sectors have a good reputation, the public hospitals aren’t so well organised.

Education is largely hindered by the language barrier. While English is widely spoken in the Baltic States, it is not the primary language in schools and, so, while education is of a high standard, it is probably best to continue to educate your child in Britain unless they are young enough to easily absorb a complex second language.

Transport

easyJet flies into Tallinn, as does the national carrier Estonian Air. Once in the city, there is a range of hire care firms available if you wish to drive, which is on the right. If you preferred that somebody else did the navigating, there are always taxis available, while buses, trolleybuses and trams provide an even cheaper alternative.

Riga is perhaps the most accessible of the three capitals, as it is serviced by easyJet, Ryanair, BA and Lufthansa. Latvia has a good road network, and is home to the Via Baltica – one of the largest infrastructure projects currently underway in the Baltic’s. A national rail service connects the major cities of Latvia for a reasonable price, although it is perhaps not the country’s quickest mode of transport.

In Lithuania, Air Baltic flies into Vilnius, while Ryanair services Kaunas. Once on the ground, Lithuania’s major roads have a good reputation, with Vilnius, Kaunas and Klaipeda being linked by a modern motorway. If driving, be aware that the Lithuanian’s have zero-tolerance for drinking and driving.

And finally…

It is unlikely that the Baltic States will become any more than a weekend-break destination due to their climate. Mild, fresh summers are succeeded by bitterly cold winters that rarely break freezing point. It is also extremely dark from October to March, meaning that Estonia, Latvia and Lithuania are unlikely to attract many full-time expats.

The language barrier can also be a tough one to break, with many Brits struggling to make head nor tale of the local dialects. And, while the capitals of Tallinn, Riga and Vilnius offer a cosmopolitan dining scene, you may struggle to get more than the traditional fare of pork and potatoes the further afield you travel.

It is also possible that the city centres are at risk of over development and oversupply has been a problems in all three capital cities. While the local market was strong, prices continued to rise at a hectic pace. Since then, the locals have been priced out of the market – therefore affecting resale potential.

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More pages

Page 1: Why The Baltics?
Page 2: Finance
Page 3: Investment potential

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