While construction costs in Latvia are similar to those seen in Estonia, land in Riga is significantly cheaper, and planning procedures often take less time.

Ongoing and planned real estate developments in Latvia come to a little over 14,600 apartments in total, but only 500 of these are being developed by local Latvian firms, according to statistics compiled by Estonian developer Invego.

Invego operates in the Latvian market, along with other Estonian firms such as Merko, Hepsor, Invego, Esterra, Kaamos, Bonava, and the Finnish firm YIT.

Taavi Soorm, CEO of Bonava Eesti, owned by Swedish stakeholders, told ERR that real estate prices in Riga are lower than Tallinn's and at a level seen in the Estonian capital around a decade ago.

"The market there is somewhat ten years behind us," Soorm said. "It is a time of middle-class people being able to afford their first home, in a new build. Wage levels and society as a whole have developed to that stage. We had a period like that 10–20 years ago."

Data compiled by Invego shows they currently have 350 residential units for sale in Latvia, while Bonava's Riga branch has 367, YIT has 168, Hepsor 49, Kaamos 47, and Esterra 15 apartments. At the same time, volumes in planned developments, some of which are already underway, are much larger: For example, Invego developments will total more than 3,500 apartments, Esterra nearly 2,300, Merko 762, and Bonava 567 apartments, if all these plans go to build.

Invego board chair Kristjan-Thor Vähi said that this year, for the first time, they have sold more homes in Riga than they have in Tallinn and its surrounding areas. Vähi pointed out that while the average square-meter price of a new apartment in Riga is about €2,770, in Tallinn the price reaches approximately €4,000.

At the same time, land in Tallinn is threefold more expensive than in Riga, though the difference in construction costs is marginal, according to the developer.

"In Riga, the prices of new developments are still lower, for now, but the gap between the two countries is narrowing. Everything is following a familiar path – initially, sales go faster for so-called budget products, but interest in more expensive developments is already growing," Thor-Vähi said.

He added that the real estate market situation in Latvia differs from Estonia's in that property south of the border has until now been reserved for the more privileged, and only recently have ordinary people gained the ability to take out home loans.

Estonian buyers have higher expectations

Thor-Vähi pointed out that in Estonia, details such as more complex ventilation solutions, floor-to-ceiling windows, or even elevators in two-story buildings, are more common requests, whereas Latvians don't yet think to ask for such things.

Soorm said much the same thing, noting that buyer expectations in Tallinn are somewhat higher in terms of architecture, square meter size, and available features.

"In Riga, the bulk of the population currently lives in Soviet-era panel buildings, so the leap to any new, modern home doesn't have to be that dramatic. In Tallinn, there are many new builds, and when people move home, their expectations are higher," Soorm noted.

He was unable to say whether the attractiveness of Riga's real estate market will continue to grow for Estonian developers in the future, but acknowledged that Bonava's Riga branch is doing very well, and has been a market leader there for years.

"There is somewhat less competition, but the market is definitely much livelier than it is currently in Tallinn," Soorm continued.

Invego statistics reveal that between 2020 and 2024, Bonava sold the most new apartments in Riga — around 2,100 units — with a total sales volume of €234 million. They were followed by YIT, Merko's Latvian affiliate Merks Majas, and Estonian companies Hepsor and Kaamos. Based on current projects, Invego forecasts that in the coming years, the leaders in Latvian developments will be the Estonian-owned Estera, as well as Invego themselves.

A review of Riga's apartment market by real estate agency Colliers Latvia pointed out that in the lower price segment, typically located in more outlying areas of the city, which is considerably larger than Tallinn, the developers are mainly local firms. In the mid-price range segment, primarily in residential suburbs with good transport links and access to services, the main developers remain Bonava, YIT, Merko, Kaamos, and Hepsor, alongside AFI.

With business-class apartment developers in Riga, the leading names are Merko, Vastint, Hepsor, Eften, and local firms. As for premium developments located in Riga's city center area or on the banks of the Daugava River, the main developers are R.Evolution, Vastint, and Pro Kapital.

Latvia's home loan market growing rapidly

Jonna Pechter, head of Bigbank Eesti, which actively finances real estate in Latvia, noted that while the number of home loan agreements in Estonia grew by 57 percent in the last quarter of last year, in Latvia the figure was 127 percent.

The growth continued in Latvia in the first quarter of this year: The number of contracts signed increased by a third compared to the previous quarter.

As the reason for the rapid growth of the Latvian market, Pechter cited its previously passive state; home loan figures in Latvia had for years been lower than in both Estonia and Lithuania.

Eurostat data also shows that Latvia has the highest rate of overcrowding in residential spaces among the Baltic countries.

"The more cramped the living conditions for a household, the more likely they are to try to purchase a new home when the opportunity arises — and alongside a lower price level compared to neighboring countries, this is the second major factor keeping Latvia's market the most active today," Pechter added.

At the same time, the average amount of a home loan issued in Latvia remains modest compared with its neighboring countries: €60,000 in Latvia versus €133,000 in Estonia and €110,000 in Lithuania, though Pechter noted this was due to the overall lower prices in Riga in any case.

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