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Buying a Property in The Baltics

Why The Baltics?

Until recently the Baltic States of Latvia, Lithuania and Estonia were hardly visited by British tourists. Joining the EU in May 2004 opened a lot of doors for the Baltics, and property investors took advantage of these three burgeoning economies.

The story of the Baltic States is really one of size, and it has been thanks to such manageable land mass that all three countries achieved such an awful lot in a short space of time. Hopes that Estonia will be the first nation on earth to become completely wireless gives you an idea of where these countries are headed.

NATO membership and currencies that are pegged to the euro completed the package, while low interest rates and falling inflation encouraged the locals to get onto the property ladder. Despite being slow starters in the property game (nationals were only permitted to buy their own homes in the early 1990s), prices in the Baltics fast approached Western levels. However, in the past couple of years a combination of a drop in interest from European buyers as credit conditions tighten and an oversupply of new property has forced prices down.

Popular buying locations

The capital cities of Tallinn, Vilnius and Riga are where most British buyers have been looking, lured by strong capital appreciation and regular rental income. These three cities are hot on Prague’s heels in terms of a budget weekend destination, a fact which compliments the established long-term rental market extremely well. Rents in the capitals are falling and need to be closely examined if you are looking for the property to support itself, but still remain relatively good

Having said that, coastal resorts near the city centres have also proved popular with investors. Located just an hour’s drive south of Tallinn is Parnu – Estonia’s ‘summer capital’. Property prices here are around 30 per cent cheaper that in Tallinn itself, and the resort offers two golf courses and several spas to boot.

In Latvia, the town of Saliena, just five kilometres from Riga, is well placed for commuters. It is the recipient of some well designed master-planning, and the old port is now a bustling residential centre. Meanwhile, Lithuania’s second city of Kaunas offers a good alternative to the capital, offering bustling nightlife at more reasonable prices.

Legal issues

There are no restrictions on the type of property that you are able to purchase, however some buildings may be protected under heritage regulations. If you buy a resale property in an old town, there could be rules which you will need to abide by regarding renovation.

There have been instances of some resale homes being sold without the correct title deeds, but this isn’t a problem that can’t be avoided with the use of an independent solicitor. Be aware that the purchase contract is highly likely to be in the local language, so if your solicitor is not bilingual you will need to arrange for a professional translation.

If you are buying a new-build home, the final contact will not be signed until the property has been completed – usually around 12 to 18 months later – but this probably won’t deter many developers from charging stage payments throughout the build. If this is the case, make sure that all financial transactions are legally documented.

If buying in a city centre, you will more likely than not be purchasing an apartment. In this instance, it is a good idea to get your lawyer to check over the management contract before you sign anything. Maintenance fees are usually divided by the whole block, so it is important to ensure that, if you are buying a studio, you are not paying the same monthly service fees as the three-bedroom penthouse.

The buying process

The Baltic States rely on a notary system, similar to that in France. Despite this representation, it is essential that you employ independent legal advice from a solicitor who acts solely on your behalf.

When you have found a property that you wish to buy, you will need to put in an offer through an estate agent – much as you would in the UK. When the offer is accepted you will be required to pay a reservation fee of around €1,000 (around £900), shortly followed by a deposit of around ten per cent. As soon as you have paid the reservation fee you are legally bound to the purchase – there is no cooling off period.

Both parties sign the final contract in the presence of the notary, who then registers the new title deeds with the relevant authorities. Transfer of title can take as little as four weeks, but the time scale really depends on how quickly you are able to make an appointment with the notary.

More pages

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

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