Big shortage of new apartments

The number of completed new apartments available on the market in Riga has shrunk to the historically lowest level in the last 10 years. In March 2022, approximately 1,130 completed apartments were available for sale in new projects in Riga, which is almost half less than a year earlier, according to the data of real estate consulting company “Colliers”. About the same number of new apartments available for purchase were under construction. If the sales rate of 2021 remains the same, it is possible to buy out such a volume of housing within one year. Agija Vērdiņa, associate director of Colliers’ Research and Consulting Department, explains what the current situation with the availability of new housing means for the industry and consumers. Several years after 2007-2010 After the global financial crisis of 2017, Riga still had a relatively large balance of apartments built before the crisis, and active sales of these apartments took place until 2017, when new developers began to enter the market and the construction of new projects resumed more rapidly. Starting from 2018, the number of new apartments on the market gradually increased. At the same time, as the average wage increased and bank financing became more accessible, the sales volumes also grew, creating a healthy balance between what was built and what was bought. The situation changed in the spring of 2020, when the world was shaken by the Covid-19 pandemic. Under the influence of ignorance and uncertainty, construction volumes slowed down for a while, while, contrary to forecasts, the demand for new housing increased, resulting in a sharp decrease in the number of completed apartments available on the market. Even projects that previously had little interest from buyers were sold out. The number of transactions with apartments under construction also increased rapidly. “Since the beginning of this year, the number of completed new apartments available on the market in Riga has decreased by approximately 300 apartments, while compared to March 2021, the volume of such apartments has fallen by almost half. The dramatic situation could seemingly be dispelled by the data on the apartments under construction – there are about 3,500 of them at the given moment, however, in fact, most of them have already been sold, and some have been reserved. This means that a total of about 2,500 new apartments are available on the market, but many of them have to wait even more than a year until they are actually completed and buyers can move into them. If we assume that even in the current conditions caused by the war, the start of new projects will take place cautiously and slowly, in the second half of next year we will observe an even greater shortage of new apartments. If the mentioned scenario is fulfilled, such housing will become a marked deficit product, for which the demand will exceed the supply, as a result of which the selling price of the new apartments will increase even more,” predicts A. Vērdiņa. Of the apartments currently under construction, the largest number, or approximately 16%, is currently in the projects built by “Bonava Latvija”. Similar to the market average, 53% of these apartments have already been sold.

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