Why to invest in real estate in the Baltic States – it is profitable2017-10-06
At the International Emigration Expo 2017 conference, Linas Kliukas, founder of the Fastmigration, has made a presentation on business immigration to the Baltic countries. Fastmigration is a partner of Profithill, an investment management company abroad. Together, these organizations prepared material on the potential of the real estate market in Lithuania and Latvia. Conclusion: this property is attractive.
Facts and Figures
The Baltic countries managed to implement a number of reforms that helped to build an open and stable economy. Investments in it spurred the real estate market.
According to the study of the Global Property Guide, Lithuania and Latvia are included in 15 countries of the world, where residential property prices show the greatest growth. So, in Lithuania for 2016 the square meter went up by 5.07%, in Latvia – by 5.85%.
In Lithuania there was a record growth since 2008 in apartment prices in all five largest cities: Vilnius, Kaunas, Klaipeda, Siauliai and Panevezys. The leader – Vilnius, here prices rose by 6.8% in 2016 and by almost 25% compared to the year of 2010.
In Latvia, the prices for apartments in the old buildings in Riga have grown by almost 7%, and new apartments’ prices have risen by 3-4%. Even more, in 2016 athe cost of housing in Kauguri (Jurmala) and Salaspils have risen by 12.4%.
These news are especially encouraging against the background of the depreciation of Ukrainian real estate: in the past year it has fallen in price by 3.34%. In Russia, apartments lost in price even more – 9.27% per year. But the Baltic countries outstrip even the stable European neighbors. So, in Finland in 2016, residential property grown a symbolic 0.39% in price, in Sweden – 4.6%.
“As you can see, buying residential property in the Baltic countries is a very good solution, which gives a stable forecasted income. In addition, in Latvia, the purchase of an real estate object worth 250 thousand euros is the basis for obtaining residence permit. Though, it should be remembered that if you want to invest in real estate in Riga or Jurmala, you need to invest 250 thousand euros into a single object in order to obtain a residence permit, whereas in other regions, you can choose two, “says Linas Kliukas, founder of FastMigration.
Friendship with banks
But smaller investments are very effective. In the Baltic States, real estate gives comparable operating income from the lease. For housing it is 4-6% per annum and for commercial real estate – from 7 to 10%. “Everything becomes much more interesting if the bank financing is connected. Then margin increases to 6-9% per annum for residential real estate and up to 10-15% for commercial properties, “Profithill specialists note.
In Ukraine attracting bank loans seems inappropriate, but in the Baltic States, mortgage rates in recent years are very low. In Lithuania, it is 1.9 – 2%, in Latvia – from 2.2 to 2.5% per annum for new mortgage loans. Therefore, experts recommend real estate ass the profitable option to new investors.
Cooperation with banks and specialized companies is also beneficial, because the most interesting options are not found on the websites’ ads and in the bases of ordinary realtors. Banks and specialized companies offer real estate in auctions, where objects are sold after bankruptcy and liquidation of enterprises or state property being sold.
Here is a real example from the practice of Profithill. The property is 89 m² in the center of Vilnius. Prestigious location, nothing is sold in the house. “By purchasing this object, you can count not only on a stable high rental income, but also on the fact that within five years the price of real estate in such a premium location will grow. At the same time, rental rates in Vilnius are also growing – by 2% in 2016, in 2015 – by 5%, “Profithill specialists emphasize.
Another possible option – participation in development projects. Standard scheme: 10% – Profithill + FastMigration, 60% – bank funds and only 30% – investments. “We not only organize the purchase of a share of the project, but also promote its development so that our investors can enjoy the migration benefits,” says Linas Kliukas, founder of FastMigration immigration services boutique. Since the price of objects is from 200 thousand euros, a bank loan will provide an investment for obtaining migration benefits.
The yield of such “mixed” projects is from 20 to 50% of the invested capital. For example, a car wash was built, it was leased to a large network. The return on investment is 14%. “Now, at an active stage, the project of reformatting a large room in the center for mini-offices (with an area of about 20 m²). Since the demand for a such format of office real estate is now high, we estimate the profitability of the project at 50%, “says Linas Kliukas.
There are options for participation in projects and for the most cautious investors. Now FastMigration is licensed by the national bank to launch an investment platform that will accumulate small deposits – from 1,000 euros.
Experts Profithill and FastMigration are confident that in the coming years the attractiveness of investments in real estate in the Baltic States will only grow. “The Baltic countries show steady economic growth, an increase in the purchasing power of the population, low inflation and unemployment, plus low interest rates on mortgages. As a consequence, prices and demand for housing are growing. Now is a very good time for investing in profitable real estate, “- sums up Linas Kliukas.
FastMigration – a boutique of immigration services, specializing in EU countries. The company has offices in Lithuania, the USA, Germany and Ukraine.
Fastmigration is a partner of ProfitHill, an expert in managing investments in foreign real estate. Together, these organizations provide a wide range of services in the areas of investment, immigration and business immigration in the CIS and Europe. Fastmigration helps companies and individuals competently transfer their assets and business to another country, invest in real estate, obtain residence permits and citizenship in EU countries, and provide related services.
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