Latvian Real Estate

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Since the year 2000 Latvia has had one of the highest (GDP) growth rates in Europe.^[1] In 2006, annual GDP growth was 11.9% and inflation was 6.2%. Unemployment was 8.5% — almost unchanged compared to the previous two years. However, it has recently dropped to 6.1%, partly due to active economic migration, mostly to Ireland and the United Kingdom. Some believe that Latvia's flat tax is responsible for its high growth rate, but this is not universally accepted. Privatisation has been mostly completed, except for some of the large state-owned utilities. Latvia is a member of the World Trade Organization (1999) and the European Union (2004).^{[citations needed]}

The fast growing economy is regarded as a possible economic bubble, because it is driven mostly by growth of domestic consumption, financed by a serious increase of private debt, as well as negative foreign trade balance. The prices of real estate, which increases at amount approximately 5% a month (due to lack of tax legislation that could prevent speculations in real estate market), are perceived to be too high for the economy, which mainly produces low valued goods and raw materials. As stated by Ober-Haus, a real estate company operating in Poland and the Baltics, the prices of some segments of real estate market have been stabilised as of summer 2006 and some experts expect serious reduction of real estate prices in the near future.

The government introduced special program to reduce inflation and remain high growth rates recently.^{[citations needed]} The main points of the plan are:

To create a non-deficit country budget for the current 2007 year and a budget with a surplus for 2008 and beyond;
to tax any transaction concerning real estate that has been in a person's possession less than three years;
to increase control of credit;
to increase energy effectiveness in homes and business to guard against possible rises in energy costs, and
to increase work productivity and stimulate competition in business.

Latvia plans to introduce the Euro as the country's currency but, due to the inflation being above EMU's guidelines, this is unlikely to happen before 2010.^{[citations needed]}