Saying this I also knew that countries with high growth rates usually mean high deposits e.g. 30% or stage payments until completion. With very little leverage the return on investment is obviously some what restricted. 

With this in mind I started looking at the countries that have just joined or are about to join the EU and their different potentials.

After much research I found it difficult to find any self financing deals, for example that would pay the mortgage and have a surplus income left over. This is usually because the loans are over 15 or 20 years, or the interest rate was too high making the repayments too high. That was until a contact told me about the Baltic States.

Why Invest in Latvia?

• Low deposits until completion
• Healthy rising property market
• Well developed banking system- mortgages over up to 30 years
• Economically stable, geographically well placed and high GDP (Gross Domestic Product) Good rental demand

Well Developed Banking System - The banks in Latvia are well developed and keen to offer loans for real estate. This varies from 100% mortgages to Latvian citizens and up to 85% to foreigners. Put down only 10% on developments till completion and borrow up to 85% of the final valuation and not the purchase price. You then have the choice to borrow in 3 different currencies all with different interest rates. Latvian lat, US$ or Euros.

Lowest interest rate at the moment is the US Dollar. The most important factor is that the mortgage is given on the final valuation and not the price you paid. This is rarely possible in the UK anymore and is most unusual for a small Eastern European country. Most projects are completed in one year so this means you get a good period of capital appreciation before completion. 

This appreciation is important as you have only put down 10% deposit. So when the building is complete you have enough equity to get a 70% to 85% mortgage.

Example
Buy an apartment for £100,000
Deposit only 10% = £10,000
Appreciation at very lowest 20% in one year to when you take possession of the apartment £20,000 
Value £120,000
Mortgage offer (subject to your circumstances) at 85% of £120,000 = £102000 

Property Market - Property prices increased as much as 50% in some areas during 2004 and still the market remains just as busy. The crucial element is to get in on the right development. If you do
the reasonable 10% deposit and favourable borrowing from the banks makes for a potential 500% or more return on investments made now. I have recently Bought 5 apartments on one development at 10 % deposit and the prices have risen 5 times to a total of 30% since January this year.

Economics - Due to its highly advantageous geographical location on the Baltic coast Latvia has for centuries been recognised as a significant industrial and international trade centre.

Since the restoration of independence in 1991, Latvia plays an active role in world affairs. Latvia has joined NATO and since 1st May 2004 is a European Union member state. 

Latvia’s GDP growth has been about twice as fast as in the EU. Between 1996 and 2000, it has averaged close to 5% annually, peaking in 1997 with 8.6%. (Latvian Development Agency)

In 2000, GDP grew by 6,6%, meaning that Latvia enjoyed the fastest growth among the EU applicant countries, and proving that Latvia had overcome the slowdown caused by the Russian August 1998 financial crisis. The tendency continued in 2001, the growth rate reaching 7.7%. The main reasons behind the strong growth were domestic demand and exports especially to Russia as a result of appreciation of Rouble. 

However, during the first few months in 2002, growth of exports halted and the economic growth became more dependent on the domestic demand. In the end, exports grew by 5.4% in 2002. (Bank of Finland) At the end of 2000, Latvia had reached only some 60% of the 1990 GDP level and the GDP per capita income level was less than one-fifth of the EU average, being slightly above USD 2600. 

Rental demand - Between 6 and 12% yields Rental demand is good in the centre although the market is what the UK would compare to as undeveloped as yet. Many locals will buy if they have the option to so it is important to buy in the right places when considering a buy to let option that it is close to the centre or in a desirable area.

There are still apartments available on developments I have bought on and prospects are sill good, we also have other projects coming up soon. Please don’t hesitate to give us a call.