Country Guides Country Guide: The Baltic States

Date Published:

18/06/2009

The Baltic States of Estonia, Latvia and Lithuania are located in northeast Europe on the Baltic Sea, neighbouring Poland and Russia. Could they be the next big thing?

By Gordon Miller

An Overview

The three countries are generally grouped together from a geographical perspective – and because their property markets are similar – but they do not operate as a federation; each is a sovereign nation and has its own democratically elected government.

The Baltic States were little known to most Westerners prior to the fall of Communism, but each has a history that dates back several centuries. Their capital cities are listed as UNESCO World Heritage sites: Vilnius, Lithuania, is a maze of Gothic, Renaissance and Baroque architecture; Riga, Latvia, has sublime Art Nouveau buildings, which escaped the worst of the Soviet era’s ravages and philistinism. Today, the cities’ attractive medieval centres – Tallinn’s is arguably the prettiest – are the main tourism drivers that are helping to boost their respective economies.

For a couple of years in the mid 2000s, the Baltics were the best performing real estate markets globally. In the fourth quarter of 2006, Riga witnessed capital growth of 66.6 per cent – the highest in the world – in year-on-year performance, according to the Knight Frank Global Index. But as spectacularly as they increased, so they have fallen with an almighty crash. In Tallinn, Estonia’s capital city, the average price of two-room apartments plunged 17.2 per cent to Q3 2008 from a year earlier, according to GlobalPropertyGuide.com.

Investors, whose lemming-like leap into the market created the inflationary bubble, may not be thrilled with the downturn but everyone else should be delighted that these pretty cities are once more affordable. Expect to pay from around £120,000 for a modernised one-bedroom apartment in Tallinn's old town. A modern one-bedroom apartment on the city’s outskirts can be picked up for around £60,000. Much like everywhere else, property prices are still falling in the Baltic States but by not as much as they did in 2008. As for the future, who can tell? But it seems the bottom of the market has yet to be reached.