 |
|
|
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. Where? I hear you ask- exactly what I said when told. Situated just below Sweden and Finland across the Baltic Sea, Estonia, Latvia and Lithuania make up the Baltic States. Continuing research I soon found you can own property in Lithuania but as a foreign national cannot borrow money. However Latvia and Estonia are much more favourable to those with an alien passport. Please take a minute to read the benefits of the Baltic States focusing on Latvia at the moment which is out performing Estonia in terms of capital growth. .
Riga, Latvia’s capital is undoubtedly one of the most beautiful cities in Europe with tourism increasing every year thanks to budget airline Ryan air starting flights in May 2004. It is the largest and most cosmopolitan of the Baltic States with the most vibrant night life to offer. The old town has the most beautiful architecture dating back to the 11t h century with a wealth of churches and merchants houses. 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.
In this example the mortgage offer and your deposit exceeds the purchase price paid. I have been advised by the banks that they will give you cash back if this is the case, leaving money for furniture or a deposit on another apartment. With rentals being strong at 6 to 12 % yield a year in the right places, this will pay a 25 or 30 year mortgage easily and leave some money left. Having said this, the rental market is quite undeveloped and you have to be very careful when choosing a development to buy on. 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
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. Nowadays Latvia offers politically and
economically stable environment for foreign business being an ideal springboard
to vast Russian and EU markets.
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
Low Taxes
- Tax on rents is 25% of rental profits (minus interest payments and
expenses)
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.
|
