Editor’s Focus: Eye on Latvian Real Estate (part 2 of 2)
By Oleg K. Temple, October 2009.
Unless you've read part one of this article (and perhaps even if you have), you may think I've gone soft in the head when you read the next phrase: it is a good time to be in Latvia! Sure, prices for real estate have crashed through the basement and (largely due to the 3% VAT increase in January this year with another +2% VAT hike looming in 2010) commodity prices have escaped up the chimney taking consumers' income with them in a puff of smoke.
Interview with V. Firsova | Interview with G. Ziedonis
In 5 years Latvia has gone from status of "Wunderkind" with one of the fastest developing economies in Europe to "Wasteland" on the charts of investors and banks. Many professionals have flown the coop to "greener" pastures in the West; defaults and bankruptcies are rife. What can be good about any of that, right? Well, I'll tell you: those of us who are still standing have a truly golden opportunity to rebuild and get it right this time around. It is up to us whether we choose to see the situation as half good or half bad. As I have detailed in the articles about Latvian economy: Baltic Tiger: In the Eye of the Storm and Latvia: Milestones on the Road to Economic Recovery, ardent efforts are underway to set things aright.
| In times of great hardship great opportunities await discovery, it is up to us to identify and seize them! I perceive the current state of affairs as the Economy's way of cleaning itself and teaching businesspeople and politicians to trifle with it no longer. The gravy train of free money has screeched to a halt; it is time to work for it or burn for it. Prior to the recession, the economy was fuelled mainly by banks, whipping real estate projects that relied on each other for sustenance into a frenzied trance by insider trading and rampant lending of funds to secure over-estimated properties. This particular Ouroboros was doomed to choke, now people think before they spend or invest, they are not in such a hurry to use bucket loads of money to douse their burning desire for more wealth; intelligent caution is a good thing. | The mythological Ouroboros snake, a symbol of infinity.  |
Some feel that the Latvian real estate market was over-hyped and artificially maintained, doomed to destruction by design, others say there was a solid foundation for prices in Riga rivalling those of Antwerp in Belgium... For this first Editor's Focus article, The Cornerstones of World Business set out to interview experts from two of the most prominent firms with many years of experience in the real estate market to learn firsthand what they make of the crisis and what hope there lies for the future.
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"Now the prices bow to the buyer..." – Ms. Velta Firsova, Head of Real Estate Agency of Mortgage Bank |
CSW: What was the greatest achievement of your company over the past year?
"The biggest achievement of the "Real Estate Agency of Mortgage bank Ltd." (SIA "Hipotēku bankas nekustamā īpašuma aģentūra") in the previous year was development of new products in relation to its parent company - Mortgage bank, which pertain to provision of various solutions to the Bank's clients, facing financial difficulties. Besides, in spite of the overall economic slowdown on the real estate and construction market, we still have managed to attract external clients - national and municipal institutions.
The biggest challenge of the company for the moment is to hold tight to its positions on the real estate market, in times when crisis has struck at the development of this area, as well as to convince clients that using our services and products is worth a deal. In a way, we have to take care of boosting the optimism, both for ourselves and our clients. And, indeed, this task is not a piece of cake. The current economic environment imbues me with motivation to take up new challenges. A desire to comprehend and also to prove that we can work, that there is something to be done, and that we still are able to turn the "morose client" into the "happy client."
Speaking of competition, we do not regard it as a problem - rather our driving force, making us adopt the good experience of our rivals and keep working on ideas of our own."
CSW: What advice would you give to people who are planning to buy or sell a property in 2009?
"I suggest both buyers and sellers to consider their decisions thoroughly in the contemporary marketplace.
Anyone willing to sell a real estate in 2009 should himself or herself identify the true motivation of the deal, and, of course, be aware of the fact that the returns would be ~ 10% less than expected in the scarcest previous estimates.
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Funds permitting and good offer popping up to obtain a real estate? This is the right time, then. Now the prices bow to the buyer, although, buying just for the love of the game is not advisable, when the only driver is that "it's dirt cheap" - it still requires consideration - why, and how am I going to use this property, because purchase of real estate is not the same as shopping for a new dress on sale!" :-) |
CSW: What is your take on the contemporary business scene in Latvia?
"I would evaluate the business environment in Latvia as inflexible - it is constructed theoretically accurate, but, on many occasions it turns out to be scarcely linked to the needs of business folk. And the reason for that is that the primary object of national economic and business policy has never been the businessman and his opportunities to work. The problem is that the political principles are not in accordance with business needs."
CSW: If you could live and work anywhere in the world, where would you be right now and why?
"My place to live and work is here - in Latvia. It is interesting for me here. It requires a little effort from yourself to drive away boredom from your working environment, from your daily life.
I would not even argue that living in a different climate by a warm sea with sun always shining is cool. But, let's leave it for reveries during the murky days under Latvian weather and times when you are totally fed-up:-)"
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"The future belongs to young and energetic people..." – Latvian joint-stock company "State Real Estate" project manager Guntis Ziedonis |
CSW: What was the greatest achievement of your company over the past year?
"Last year, despite the beginning of the crisis, Latvian joint-stock company "State Real Estate" had good financial results, they even surpassed the forecasts. It was the best result in the history of company. We have sold many real estate units, as well as two big property units in Jurmala in auctions, total amount 10 million EUR. We have started to work on several new projects.
We are one of the biggest real estate companies in Latvia with more than 200 employees. We manage a big part of state real estate. We sell real estate as well as plots of land in auctions. We also sell plots of land on which there are buildings belonging to other people as a result we unite the rights to the land and property of buildings. This way we avoid the damaging of market."
CSW: If you could live and work anywhere in the world, where would you be right now and why?
"For now I am in Latvia, so it means Latvia needs me and I am appreciated here and I do not need to search for happiness [elsewhere] in the world. You have to be flexible, to see what is going on in the East and the West to be able to evaluate the business situation and everyday life in Latvia. We have to be more patriotic and optimistic. People have to work hard and seriously wherever they are. It is necessary to work hard to be able to relax and travel at least twice a year."
CSW: Which pearls of wisdom, based on your personal experience, would you share with budding RE companies in Latvia?
"I suggest to immerse yourself in every project both like the seller and the buyer. You have to be a realist, not only sit in your office and build sand castles. We have to remember that we live in a very important age, the real estate market is very interesting now. The ones who will be able to adjust to the new situation and challenge will survive and develop."
CSW: What is the greatest challenge your company is facing presently?
"Life is not easy nowadays, the present difficult economical situation makes you evaluate the market, to see where to brake, what to give up, how to keep the good reputation of your company as well as [retain] good specialists."
CSW: What keeps you, personally, motivated?
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"As I already mentioned I remain very optimistic and realistic about the processes going on in our country, the situation in the world changes every day, we have a lot to do and the future has a lot to offer. The future belongs to young and energetic people, we have to leave them some inheritance, then we will have the satisfaction that we have achieved something." |
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CSW: What advice would you give to people who are planning to buy or sell a property in 2009?
"There are two sides to this question. Firstly, if somebody is forced to sell his or her property for one or another reason, then he or she has to sell for the price offered. Secondly, when you have the choice - to sell or not to sell. Then people have to evaluate what they will gain or lose. Every property has its buyer and it is possible to sell everything, but as you know the economy is changing and developing.
It is the year of opportunity, you just need to consider your needs and possibilities. You have to buy if you have the opportunity, don't miss your chance! Your chance is in your hands, don't miss it!"
The Editor's Focus series will continue in December. Join us and meet the men and women behind the business, the decision-makers whose word is gospel in their sphere. Until then, I wish you a profitable conclusion to the business year!
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