Macroeconomic growth prospects in the Baltic countries are currently quite good: households’ financial situation has improved, as well as the potential to attract young customers with purchasing power, being evidenced by demographic analysis, they all are setting forth the reason for cautious optimism. Such future prospects in the Baltic Real Estate market are seen by the project developers who gathered for the first Baltic Real Estate Development Forum held in Riga, on 29 September 2015.
The Forum was organized by the Latvian Real Estate Association LANIDA, Lithuanian Real Estate Development Association LNTPA and the International Real Estate Federation Baltic Multinational chapterFIABCI Baltic in collaboration with Nordea Bank support. The Tallink Hotel Riga housed, on its premises, the real estate (RE) professionals from the three Baltic countries for the first Development Forum to discuss the issues affecting the sector. The Forum had the opportunity to meet in one place and explore the experience of the three Baltic countries as well as high-caliber foreign experts, successful and influential investors, RE developers and economists as well as to establish contacts to develop joint projects in the future.
Upon opening the Forum, Antonio Campagnoli, FIABCI Regional President for Europe & Near East wished the developers to think broadly and to do routine things differently. He also mentioned the tendency that, in addition to bank funding, still more important alternative investment instruments of RE development and investment became, as an example citing recently invested 2 billion euros, so-called crowdfunding. Telman Abbasov, FIABCI World Council of Developers and InvestorsPresident, invited the Baltic developers to participate in the coming FIABCI forum 2016 Dubai World, which will be dedicated to the theme of globalization. „In FIABCI forums professionals can draw business experience, learning about the outstanding, innovative performance. We believe that cooperation can also be very successful at the international level” he said. At the beginning of the forum Ardi Roosimaa, FIABCI Baltic President, added that developers had just invested 1.7 billion euros in the European region projects, but Arvydas Avulis, Lithuanian Real Estate Development Association Board Member, wished the developers to be able to operate successfully in a variety of market conditions, adding that the following is being observed: RE field is increasingly entered by other area representatives, such as oil companies, food manufacturers, etc., who invest in properties as a future investment.
Kristaps Soms, Deputy Director of Entrepreneurship Competitiveness Department of LR Ministry of Economics, introduced the audience to the changes in the Latvian economy model during longer than 10 years time. “We are now focusing on the development of exports and securing external demand opposite those years when economic growth was based mostly on internal consumption. Passing through several crises, we have learned a useful lesson and now we are among the EU’s growth countries. 2-3% GDP growth is not a big amount, but stable, „added the official, explaining that in the coming years, EU funding will be available for RE projects, which will be used for energy-efficient projects, including residential buildings, production, development of industrial area.
In the Baltic Development Forum, on the overall situation of developers in the Baltics and future challenges from an economic analyst’s point of view spoke several analysts: Peteris Strautins, DNB bank Latvia, Zygimantas Mauricas, Nordea Bank Lithuania and Tonu Mertsina, Swedbank Estonia.
Peteris Strautins (DNB banka Latvia) acknowledged that export growth in the three Baltic countries are accelerating, because business has been able to adapt to developments and political situation in the Russian market, in the meantime the growth in the EU countries looks stable, although quite modest. Analyzing the RE market growth opportunities, the Latvian expert states that the Estonian market is expecting a slight growth, driven by the growth of wages and consumption, which in the neighboring country is quite powerful. Latvian potential for recovery is the biggest in the Baltic countries as the households and business debts reduction was the longest and hardest, but the Lithuanian real estate market is in the middle of these two extremes.
The expert from Lithuania Zygimantas Mauricas (Nordea Bank Lithuania) presented the demographics of the Baltic countries, urging the audience to think about the demographics either it may be good or bad for the Baltic RE market. Interestingly, the Baltic countries’ population, aged group between 25 and 39 years, has most purchase power, while the rest of Europe – such people are 40-59 year olds. Whereas Tallinn, out of the three Baltic countries, has the sharpest population increase, followed by Vilnius and the Latvian capital Riga which itself has a large number of people of pre-retirement or retirement age. „Riga, wake up,” called the expert, saying that it is necessary to think how to attract younger people to Riga, because it is the most direct way to help the RE market development.
Estonia’s leading bank Swedbank Estonia expert Tonu Mertsina set forth the question how well or poorly for possible economic shocks households are prepared in the Baltic countries, as well as how long interest rates will remain low, and how they may affect the RE market. The expert has observed that households’ financial situation in the Baltic countries in the past five years has been greatly improved: net financial assets have increased, but low interest rates contribute to the household loan portfolio and an increase in housing investment. „Households in the Baltics are becoming richer and are prepared to buy and invest more,” said the Estonian expert.
The developers and investors experience stories were interesting. Arvydas Avulis, from developers company Hanner, talked about the company’s experience in the development of energy-efficient housing and office building projects, as well as about Hanner’s offer to young families to redeem their first home by renting, where monthly redemption amount is 100 euros more than the average rent in the market. Ardi Roosimaa, Estonian company Uus Maa Property Advisors representative, shared how to renovate and modernize the current urban environment, to adjust the former Soviet-era buildings to human habits. Vytas Zabilius, Ober-Haus Lithuania, talked about a new tendency in Lithuania: formation of the community facilities for both the village and the apartment house projects, which are collectively used in recreational areas, sports facilities, children’s playgrounds etc. Emilis Gustainis, Acropolis group director, shared the experience how his company creates trading centers, which in addition to stores, have the most extensive leisure facilities with reverence treating the historic heritage. He pointed out that in Riga, on the former Kuznetsov porcelain factory site, Acropolis center construction could be started next year. Paulius Gebrauskas, Baltic Sotheby’s International Realty, presented the renewed Count Pliater’s Palace Apartments in the center of Vilnius: unique premium class of several historic buildings complex, adding that „the market is ready for such exclusive projects, because we observed a high demand and apartments have already been sold out in the first round.”
The final part of the Forum – the panel discussion concerned both a new commercial complex development and banks’ attitudes and availability of financing. Yelena Gavrilova, SEB, in the light of the bank’s position in the development of projects, stressed that they are always looking at good, qualitative, guaranteed projects that will bring returns in the long term, provided that the developers are willing to participate in the financing.
The participants of the discussion outlined in which segments each Baltic country observes an increased activity and what are the reasons. For example, Lithuania has been very active in the Class A office market segment, but Latvia cannot boast of many new projects, so the development of the office area in Riga would be a good prospect. In recent years, the high-end apartment building was especially developed in Riga and Jurmala. In Estonia (Tallinn) high activity is observed in the segment of retail space, which will decrease in the future. While in Riga new shopping centers are not built, only expansion of individual centers is promised. Focus group participants recognized that Riga would still have a place for one more shopping center, but with a new, interesting, high-quality concept and supply.
In conclusion, the experts of RE area were in agreement that the Baltic countries for the development of new projects in different segments has a perspective, supported by both improving macroeconomic indicators and the increase of purchasing power of the population, but the future prospects view is cautiously optimistic.
FIABCI, the International Real Estate Federation, is a business organization of real estate professionals in 65 countries which represents approximately 100 national real estate associations and holds a special “consultative” status to the Economic and Social Council of the United Nations Organization (ECOSOC). FIABCI is a non-political entity whose objective is to help its members add an international dimension to their businesses and helps members acquire knowledge, develop networks and optimize business opportunities throughout the world.
Speakers presentations: www.lanidaevent.lv
Forum photo: Failiem.lv/FORUMS
Prix D`Excellence Award photo:Failiem.lv/GalaDinner
Irina Sjarki, CEO
FIABCI-Baltic Multinational Chapter
Ph .: +371 67332034